UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ----------------------

                                   FORM 10-KSB

(Mark One)
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2002
                   -------------------------------------------

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the transition period from ________________ to __________________

                         Commission File Number 0-11353

                           CIRCUIT RESEARCH LABS, INC.
              (Exact name of small business issuer in its charter)

        Arizona                                            86-0344671
    ----------------                                   -------------------
    (State or other                                    (I.R.S. Employer
    jurisdiction of                                    Identification No.)
    incorporation or
    organization)

                              1330 West Auto Drive
                              Tempe, Arizona  85284
--------------------------------------------------------------------------------
     (Address of principal executive offices)    (Zip Code)


Issuer's telephone number, including area code  (602) 438-0888
--------------------------------------------------------------------------------

         Securities registered under Section 12(b) of the Exchange Act:

                                      None
                                 ---------------
                                (Title of Class)


         Securities registered under Section 12(g) of the Exchange Act:

Title of each class                    Name of each exchange on which registered
-------------------                    -----------------------------------------
Common Stock, par value $.10 per share                  None


<PAGE>
     Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]

     Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

     The issuer's net revenues for the year ended December 31, 2002 were
$10,772,593.

     The aggregate market value of the voting stock held by non-affiliates of
the registrant, based upon the average of the high and the low prices of the
registrant's Common Stock as reported by the OTC Bulletin Board on March 31,
2003, was approximately $627,407.  Shares of voting stock held by each
executive officer and director and by each person who owns 5% or more of the
outstanding voting stock have been excluded in that such persons may be deemed
affiliates.  This determination of affiliate status is not necessarily
conclusive.

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

     State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

         3,806,846 shares of Common Stock outstanding on March 31, 2003


                       DOCUMENTS INCORPORATED BY REFERENCE

     No documents are incorporated by reference to this Form 10-KSB.

     Transitional Small Business Disclosure Format (check one):
           Yes [  ] No [X]





<PAGE>
                                TABLE OF CONTENTS
                                                                          Page

PART I ...................................................................  1
     ITEM 1.  DESCRIPTION OF BUSINESS ....................................  1
     ITEM 2.  DESCRIPTION OF PROPERTY .................................... 12
     ITEM 3.  LEGAL PROCEEDINGS .......................................... 12
     ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ........ 12

PART II .................................................................. 13
     ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ... 13
     ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION .. 14
     ITEM 7.  FINANCIAL STATEMENTS ....................................... 34
     ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
              ON ACCOUNTING AND FINANCIAL DISCLOSURE ..................... 60

PART III ................................................................. 61
     ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
              CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF
              THE EXCHANGE ACT ........................................... 61
     ITEM 10. EXECUTIVE COMPENSATION ..................................... 64
     ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
              AND MANAGEMENT ............................................. 66
     ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ............. 68

PART IV .................................................................. 71
     ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K ........................... 71
     ITEM 14. CONTROLS AND PROCEDURES .................................... 74

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<PAGE>
                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

OVERVIEW

      We develop, manufacture and market high-quality electronic audio
processing, transmission encoding and noise reduction equipment for the
worldwide radio, television, cable, Internet and professional audio markets.
Our main product lines control the audio quality and range of radio, television,
cable and Internet audio reception and allow radio and television stations to
broadcast in mono and stereo. We operate through two divisions our Orban
division and CRL division, and we generally refer to the company on the whole as
"CRL" Our Orban division manufactures and markets audio processing equipment,
primarily using digital technology, under the Orban, Optimod, Audicy and
OptiCodec brand names. Our CRL division also manufactures and markets audio
processing equipment, primarily using analog technology, under the CRL,
Millennium, TVS and Amigo brand names.  We believe that both divisions are well
respected within the industry for innovative and quality broadcast equipment
solutions.

      We were founded in 1974 as a broadcast industry consulting company.
Building upon our understanding of the broadcast industry's needs, we expanded
into product development and manufacturing and were incorporated in Arizona in
March 1978.  Since the introduction of our first product which was designed to
improve the "coverage and quality" of AM radio stations, we have been committed
to improving broadcast quality.  We were a major participant in the National
Radio Systems Committee (NRSC) which developed the standards for AM radio
stations that were adopted by the Federal Communications Commission (FCC).
During 1987, we developed and produced equipment enabling AM radio stations to
meet certain NRSC standards, and we believe that we are a market leader in the
manufacture of AM radio signal processing equipment. We are a member of the
National Association of Broadcasters (NAB).  The NAB is the world's largest
broadcasters' association, offering a wide variety of services to radio and
television stations as well as organizations that provide products and/or
services to the broadcast industry.

      On May 31, 2000, we acquired the assets of Orban, Inc., a wholly owned
subsidiary of Harman International Industries, Inc., including the rights to the
name "Orban."  Since its founding in 1974, Orban has been an innovative producer
of audio editing and processing equipment.  Today, Orban is a leading
manufacturer of broadcast transmission audio processing equipment. Because
approximately 80% of our historic CRL products are analog and 80% of Orban's
products are digital, our acquisition of Orban has combined two complementary
product lines.  We are now in a position to offer a full range of digital and
analog audio processing solutions at multiple price points. Additionally, we
will benefit from cost savings produced by combined research and development,
marketing, sales and administration, manufacturing efficiencies and
cross-selling opportunities. Our objective is to grow our combined companies
through constant redesign of our existing products to keep pace with
technological improvements and through expansion into the emerging markets of
digital audio broadcasting (DAB), digital television (DTV), cable television and
Internet-related audio delivery.

      We incurred losses of $2,135,039 and $2,046,640 during the years ended
December 31, 2002 and 2001, respectively.  Our deteriorating financial results
and reduced liquidity caused us to renegotiate our $8.5 million loan agreement
with Harman.  Under the terms of the debt restructure agreement, Harman can
demand at any time that we immediately pay in full the outstanding balance.
Should this happen, we would immediately be forced to file for protection under
Chapter 11 of the United States Bankruptcy Code. Our inability to pay the $8.5
million debt to Harman should payment be demanded, our difficulties in meeting
our financing needs and our negative working capital position have resulted in
our independent public accountants adding a going concern emphasis paragraph to
their report by including a

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<PAGE>
statement that such factors raise substantial doubt about our ability to
continue as a going concern.  In addition to our efforts to reduce costs and
increase sales, we are currently seeking sources of long-term financing.
However, the inclusion of a going concern emphasis paragraph generally makes it
more difficult to obtain trade credit or additional capital through public or
private debt or equity financings. We have currently engaged HD Brous & Co.,
Inc. to advise and assist us in capital raising efforts. We cannot offer any
assurances that we will be able to attract additional capital or that additional
financing, if obtained, will be sufficient to meet our current obligations.  If
we cannot meet our current obligations, our ability to continue as a going
concern will be jeopardized.

     On March 27, 2003, we entered into an agreement with Harman that will allow
a restructuring of the Harman debt where the Company will privately place $1.5
million in common stock for cash consideration prior to April 30, 2003. The
Company will then make a $1 million cash principal payment on its outstanding
debt to Harman. Harman will allow the Company to retain the cash raised by the
sale of its common stock in excess of the payment to Harman. Harman will agree
to exchange $3.5 million principal amount of the debt owed to Harman by the
Company and its outstanding warrant to purchase shares of CRLI common stock, for
a number of shares of CRLI common stock such that Harman will own 19% of the
then-outstanding shares of CRLI common stock on a fully-diluted basis after
giving effect to the private placement of equity securities by CRLI referred to
in paragraph 1 above. The shares of CRLI common stock issued to Harman would be
subject to (i) a registration rights agreement with terms similar to the
registration rights granted to Harman in the warrant to be surrendered,
including multiple demand rights, and (ii) anti-dilution protection for
issuances of equity securities following the restructuring.

     Harman will exchange the remaining $3.982 million plus accrued interest due
from the Company into a single, senior note with an interest fixed at 1.5% above
the prime rate. Interest will be paid monthly. Mandatory principal payments will
also be required on the anniversary of restructuring for the next five years at
the rate of $250,000 per year for the first two years, $500,000 per year for the
following two years, and the balance due at the balance due at the end of the
five years. The transaction is conditioned upon the $1,000,000 principal payment
prior to April 30, 2003.


INDUSTRY OVERVIEW

      Audio Processing

      The audio processing equipment that we produce is used by radio and
television stations, recording studios and Internet webcasters.  Audio
processing enhances the clarity of a radio signal, boosts loudness and increases
a broadcast station's coverage area.  Our equipment "repackages" audio signals
produced by microphones, recordings and other audio sources. The equipment
alters such signals to control audio loudness and tonal balance (equalization)
prior to transmission.  Audio processing shapes the audio sound wave when it is
in electrical impulse form before it is transmitted by a carrier wave.

      Most governments throughout the world require radio and television
broadcast stations to control their signal's modulation level and occupied
bandwidth.  Radio and television stations must utilize audio processing to
comply with these governmental regulations as well as to improve the quality of
their signals.  According to the FCC, there were approximately 12,900 radio
stations and approximately 1,700 television stations licensed in the United
States as of June 30, 2001.  The Information Resource Center of

                                        2
<PAGE>

the National Association of Broadcasters, using data compiled by the Central
Intelligence Agency, calculated the number of radio stations and television
stations worldwide, as of January 2000, to be over 44,000 and over 21,500,
respectively.  Although there has been consolidation in the radio industry in
the United States, it is our experience based upon our sales trends that demand
continues to be strong for quality audio processing equipment, although there is
no trade or industry group that maintains this type of data.  Based on
replacement equipment orders, we estimate that the average useful life of audio
processing equipment is less than five years, and improvements in audio
processing equipment cause some radio and television stations to replace
equipment before the end of its useful life.

       Our recently developed products, such as those related to digital audio
broadcasting (DAB), are appropriate for the audio processing needs of the
recording and performing industries.  Digital audio broadcasting, which is the
digital delivery of broadcasting signals, enables FM radio signals to be near CD
quality in terms of clarity and enables AM signals to offer sound quality that
is comparable to today's analog FM signals.  Digital audio broadcasting is
widely regarded as the future of radio because it makes more efficient use of
crowded airwaves, provides better sound quality and is virtually immune to
interference.


      The Internet

      The Internet has grown rapidly in recent years, spurred by developments
such as user-friendly Web browsers, the availability of multimedia PCs, the
adoption of more robust network architectures and the emergence of compelling
Web-based content and commerce applications.  The broad acceptance of the
Internet Protocol standard has also led to the emergence of intranets and the
development of a wide range of non-PC devices that allow users to access the
Internet and intranets.

      Much of the Internet's rapid evolution towards becoming a mass medium can
be attributed to the accelerated pace of technological innovation, which has
expanded the Web's capabilities and improved users' experiences.  Most notably,
the Internet has evolved from a mass of static, text-oriented Web pages and
e-mail services to a much richer environment, capable of delivering graphical,
interactive and multimedia content.  Prior to the development of streaming media
technologies, users could not play back audio and video clips until the content
was downloaded in its entirety. As a result, live Internet broadcasts were not
possible.  The development of streaming media products from companies such as
Microsoft Corporation and RealNetworks, Inc. enables the simultaneous
transmission and playback (i.e., the Internet broadcast) of continuous "streams"
of audio and video content over the Internet and intranets.  These technologies
have evolved to deliver audio and video over widely used 28.8 kbps narrow
bandwidth modems, yet can scale in quality to take advantage of higher speed
access that is expected to be provided by xDSL, cable modems and other emerging
broadband technologies.  We believe there are now over 6,100 radio stations with
Internet sites.  This includes over 1,775 radio stations that are offering
Webcast or streaming services. With the Internet having no geographic limits,
thereby allowing a worldwide audience to listen to existing radio stations, the
potential for generating revenues can increase.  The audio quality of these
Internet radio streams still lags behind that of conventional audio.  We believe
that we already have many of the solutions for the audio quality issues being
presented by these new formats and delivery systems, as outlined below.

                                        3
<PAGE>
BUSINESS PLAN AND GROWTH STRATEGY

      Our growth strategy consists of the following:

      Integrate Orban Operations.    We continue to integrate the operations of
the former Orban with our existing operations in order to achieve economies of
scale, manufacturing and marketing efficiencies, reduced operational expenses
and cross-selling opportunities.  The combined operation of Orban/CRL provides
many new products and product lines.  Both Orban and CRL products have been and
will continue to be sold through dealership networks as well as international
distributors.

      Focus on Core Audio Processing Business.    We will continue to focus on
growing our core audio processing business because:

      * We believe that we are a leading producer of broadcast transmission
        audio processing equipment for the broadcast industry;

      * Although there has been consolidation in the radio industry in the U.S.,
        it is our experience based upon our sales trends that demand continues
        to be strong for quality audio processing equipment, although there is
        no trade or industry group that maintains this type of data;

      * Based on replacement equipment orders, we estimate that the average
        useful life of audio processing equipment is less than ten years, and
        improvements in audio processing equipment cause some radio and
        television stations to replace equipment before the end of its useful
        life; and

      * We believe that our product depth, technical superiority, and strong
        distribution channels have positioned us to increase our market share,
        especially in burgeoning international markets where growth is being
        spurred by increased radio station usage and the issuance of new radio
        licenses;

      Develop New Products and Acquire Additional Product Lines.    We are
exploring and developing new products, such as our OptiCodec line of digital
encoders and decoders which gives us our first Digital Transmission System for
use over the Internet as well as Integrated Services Digital Network (ISDN), ATM
and Frame Relay phone lines with its TCP/IP address ability. Last year we
devoted over $1.4 million to research and development, an increase of 2% over
the previous year.  We will continue to devote a significant percentage of our
revenue to research and development. In addition, we intend to make strategic
acquisitions of additional product lines that are adaptable and complementary to
our existing products.  For instance, on May 31, 2001, we acquired the assets of
Avocet Instruments, Inc., a supplier of quality audio receivers and coders for
the television and post-production industry. Our acquisition of the Avocet
product line expands our range of television products and provides us with
access to a new market segment within the television industry. We then acquired
the assets of Dialog4 System Engineering, GmbH on January 18, 2002 which was our
supplier for our Codec product line, for the purpose of expanding our ability to
sell and market our Codec line of products.

     Increase Penetration in Emerging Markets.    We believe that the emergence
of rich multimedia capabilities, such as streaming audio and video, has
significantly enhanced the effectiveness of the Web

                                        4
<PAGE>
as a global mass communications medium and has accelerated the adoption of
corporate intranets as a means to improve communications within enterprises.
These enhanced multimedia capabilities, combined with the unique interactive
properties of the Internet, are attracting a large and expanding audience and an
increasing breadth and depth of content and online commercial applications.  As
the Web continues to evolve as a mass communications medium, we believe that
certain types of content currently delivered through traditional media, such as
radio and television, increasingly will be delivered over the Internet.  We
believe that we already have many of the solutions for the audio quality issues
being presented by these new formats and delivery systems, and we intend to
leverage our technologies in the rapidly growing markets of digital audio
broadcasting (DAB), digital television (DTV), cable television and
Internet-related audio delivery including our Optimod-PC.

PRINCIPAL PRODUCTS

      Our CRL division manufactures and markets audio processing equipment,
primarily using analog technology, under the CRL, Millennium, TVS and Amigo
brand names. Our Orban division also manufactures and markets audio processing
equipment, but primarily using digital technology, under the Orban, Optimod,
Audicy and OptiCodec brand names. The combined product line can be separated
into four different series or product families, FM Series, AM Series, TV Series
and other audio post-production workstations.

      In 2002, our Orban division which includes its office in Germany accounted
for 93% of net sales while our CRL division accounted for the remaining 7%. In
2001, our Orban division before we created the German office accounted for 92%
of net sales and our CRL division accounted for the remaining 8%.

THE FM SERIES OF PRODUCTS

      Optimod-FM 8400.  The Optimod-FM 8400 is our "flagship" digital audio
processor introduced in the summer of 2000. It is based on Digital Signal
Processing (DSP) technology that is five times more powerful than that of its
predecessor, the Optimod-FM 8200. It is easier to use than previous processors,
having a number of preset configurations which customize sound processing for
specific formats and target audiences. It can be used for either classical/jazz
formats or for popular music/talk formats, depending on the settings. It permits
customized control of compressor threshold, equalization, balance control,
attack rate and multiband clipping for users who do not wish to use the factory
presets. It includes a DSP-based stereo encoder and composite processor, target
zone gating Audio Gain Controller (AGC), 2 and 5 band compressor, multi-band
limiter and graphic equalizer. Two different types of stereo enhancement are
standard, and it can be operated in either stereo or mono mode. It is compatible
with industry standards.

      Other Optimod Processors.  Our Orban division also produces other
processors with fewer features at lower costs. The Optimod-FM 8200 Signature
Series uses digital technology and has factory presets but can be customized for
optimum sound. It also permits tailoring a signal for loudness, clarity,
brightness and "punch" as required, but at lower cost. The Optimod-FM 2200 is
based on technology in the Optimod-FM 8200 and offers the benefits of digital
processing to stations with a modest budget. Other Optimod-FM products include
the 8218, a stand-alone digital FM stereo encoder, and the 8200ST which is an
adjustable compression studio chassis.

      CRL Amigo-FM.  The CRL Amigo-FM Audio Processor is an integrated "one box"
processing system for small to mid-size radio stations on a tight budget. It is
a single unit with a dual band AGC, a variable pre-emphasis multi-band limiter,
and digitally synthesized stereo generator.

      Other FM products.  Other CRL FM products include the Millennium, a
digital audio processor, Modulation Signature, a multi-band limiter, the SG-800A
Stereo Generator, and the SCA-300B Subcarrier Generator. In addition, Orban
offers the 222A, which is a stereo spatial enhancer.

                                        5
<PAGE>
THE AM SERIES OF PRODUCTS

      Optimod-AM 9200.  The Optimod-AM 9200 is our top-of-the-line digital audio
processor for monophonic AM radio stations, which enables the user to maximize
the sound quality available within the limitations of the AM channel.

      Optimod-HF 9200.  The Optimod-HF 9200 is a complete digital audio
processor designed for the demanding requirements of short-wave broadcasting and
"all-talk" AM radio stations that are experiencing nighttime interference
problems.

      Optimod-AM 9100B2.  The Optimod-AM 9100B2 is a complete audio processor
with a six-band limiter and distortion-canceling clipper for stereo AM radio
stations.

      CRL Amigo-AM.  The Amigo AM Audio Processor is a complete stereo audio
processing system, including a dual band AGC, triband limiter, and NRSC
(National Radio Systems Committee) output filtering. It is designed for small to
mid-size radio stations on a tight budget.

      Other AM Products.  Our CRL division also offers the Amigo Talk, Amigo HF,
AGC-400 Automatic Gain Controller, the SEC-400 Multi-Band Compressor/Equalizer,
the PMC-450 Limiter and the AM-4 Monaural Audio Processing System.


TELEVISION PRODUCTS

     Optimod-TV 6200.  The Optimod-TV 6200 is our top-of-the-line digital audio
processor for two-channel (left and right audio channels) digital television
transmissions (DTV). It provides two-band and five-band Optimod processing
structures and is compatible with all digital television applications, including
conventional land-based, cable or satellite distribution of mono, two-channel or
Dolby Surround encoded programs.

     Optimod-TV 8282.  The Optimod-TV 8282 is a digital audio processor designed
for analog television audio, whether mono, stereo or dual-language, and is
compatible with all monophonic and stereo broadcast systems.

     Other Optimod-TV Products.  We also offer the Optimod-TV 8182A which is an
analog audio processor for both stereo and monophonic analog television; the
Optimod-TV 8185A, a BTSC television stereo generator; the Optimod-TV 8182A
Secondary Audio Program (SAP) Generator which is primarily designed for public
second language use; the Optimod-TV 8185A PRO Generator (Professional channel
for non-public use); and the 275A Automatic Stereo Synthesizer which improves
the sound of monophonic programs when heard on stereo or surround television
systems.

      CRL TVS Processors.  Our CRL division offers audio processing products for
television, including the TVS-3001, a top-of-the-line stereo television
processing system designed with surround sound compatibility; the TVS-3003, a
digitally synthesized stereo TV generator; the TVS-3004, a Professional Channel
(PRO) digitally synthesized subcarrier generator; and the TVS-3005, a digitally
synthesized subcarrier generator for a secondary audio program (SAP) channel

      CRL Amigo-TV.  CRL Amigo-TV is a complete audio processing solution for a
variety of monophonic television applications.

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      Avocet Pro-Line 102A.  The Avocet Pro-Line 102A is designed for internal
foldback and data transmission applications. Its single rack space design
enables secure mounting in mobile broadcast facilities.

      Avocet TV-2.  The Avocet TV-2 is a modular receiver capable of
incorporating Main SAP and/or Pro audio. Its SAP channel incorporates full dbx
decoding for the most accurate and clearest audio available. It enables the user
to receive or monitor production-quality audio for many applications, including
feeding SAP channel to distribute promotional spots to radio stations and
feeding translators and repeaters.

      Avocet AV100.  The Avocet AV100 television audio receiver features
high-quality audio with professional specifications and balanced SAP and Main
channel outputs. It can also be used for monitoring the Emergency Alert System,
recording programming off-air, sending news promotionals to radio stations and
rebroadcasting to translators.

OTHER PRODUCTS

      Optimod 6200S.  The Optimod 6200S is our top-of-the-line digital audio
processor for Internet Webcasters.

      Optimod-DAB 6200.  The Optimod-DAB 6200 is the first audio processor
designed specifically for digital audio broadcasting (DAB).

      Audicy.  Orban manufactures and sells digital audio production and video
post-production workstations under the Audicy brand name. The workstations
feature a simple set of controls and other features designed to reduce customer
training costs.

      OptiCodec.  We announced the introduction of a new line of codecs in
October 2000, which are being sold under the OptiCodec brand name. The term
"codec" is derived from the words "enCOde" and "DECode" and represents a
technology utilized in the transfer of digital data. Our OptiCodec line of
products will allow our customers to send high-quality digital audio over the
Internet, computer networks and special Integrated Services Digital Network
(ISDN) telephone lines.

      Other.  Our other products include stereo and monophonic gain controllers,
stereo spatial enhancers, test and analysis tools, studio chassis, and other
products related to our audio processing equipment.

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<PAGE>
MARKETING AND CUSTOMERS

      We sell our products to AM and FM radio stations and television stations
around the world.  According to the FCC, there were approximately 12,900 radio
stations and approximately 1,700 television stations licensed in the United
States as of June 30, 2001.  The Information Resource Center of the National
Association of Broadcasters, using data compiled by the Central Intelligence
Agency, calculated the number of radio stations and television stations
worldwide, as of January 2000, to be over 44,000 and over 21,500, respectively.
Stereo broadcasting in both radio and television requires audio processing
equipment.  Based on replacement equipment orders, we estimate that the average
useful life of audio processing equipment is less than five years, and
improvements in audio processing equipment cause some stations to replace
equipment before the end of its useful life.

      Sales of our products are conducted primarily through wholesale
distributors and dealers.  Most distributors of our products are also
distributors for other products used by radio and television stations. None of
our distributors solely distributes our products.

      In recent years, the radio and television industry in the United States
has experienced a great deal of consolidation of ownership.  As a result,
several corporations each now own a substantial number of radio and television
stations.  These corporations are the largest purchasers of our audio processing
and post-production equipment. In 2002, one of our largest customers, Harris
Corporation, accounted for approximately 14% of net sales. In 2001, the same
customer accounted for approximately 19% of net sales. Broadcast Supply
Worldwide accounted for just over 10% of our net sales for 2002 representing an
increase of 2% over 2001.  We rely to a large extent on replacement orders
placed by existing customers. In 2002 our domestic customers account for
approximately 50% of our sales revenues while foreign customers account for the
other 50%. In 2001 our domestic customers accounted for approximately 49% while
our foreign customers accounted for approximately 51%.

COMPETITION

      The market for broadcast transmission audio processing equipment is only
marginally competitive, primarily because it is a mature market that is not
characterized by a large amount of growth.  We compete with a limited number of
other manufacturers of audio processing equipment.  However, we cannot state
with any precision our relative standing within the industry.

      We concentrate on the market opportunities that management believes are
compatible with our resources, overall technological capabilities and
objectives.  The principal competitive factors in our business include
cost-effectiveness, product quality and reliability, technological capabilities,
service and financing for research and development.

INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

      Our success and ability to compete is dependent in part upon our ability
to protect and maintain our proprietary rights to our intellectual property. We
rely on a combination of patent, trademark and copyright laws and restrictions
on disclosure to establish and protect our intellectual property.

      We have pursued registration of our key patents and trademarks in the
United States and overseas.  We own several U.S. registered trademarks including
Orban, Optimod, Audicy, Dynafex,

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<PAGE>
CRL, CRL Systems and Millennium and have filed registrations for these marks in
Canada, Japan, India, Brazil, Taiwan, Australia and certain European countries.

      Since our inception, we have been granted a number of patents, many of
which have expired.  As of March 31, 2003, we hold the following U.S. patents
which we deem to be of material importance to our competitive position within
our industry:

     * United States Patent No. 4,837,824, entitled "Stereophonic Image
          Widening Circuit"
          Grant Date: June 6, 1989

     * United States Patent No. 5,050,217, entitled "Dynamic Noise Reduction
          and Spectral Restoration System"
          Grant Date: September 17, 1991

     * United States Patent No. 5,444,788, entitled "Audio Compressor
          Combining Feedback and Feedforward Sidechain Processing"
          Grant Date: August 22, 1995

     * United States Patent No. 5,737,434, entitled "Multi-Band Audio
          Compressor with Look-Ahead Clipper"
          Grant Date: April 7, 1998

     * United States Patent No. 6,337,999, entitled "Oversampled Differential
          Clipper"
          Grant Date: January 8, 2002

      Patents issued prior to 1985 have a 17 year term.  Patents issued after
1985 generally have a term of 20 years from the date on which the application
for the patent was filed in the United States or, in special cases, from the
date an earlier related application was filed.  Under U.S. law, the right
conferred by the patent grant is the right to exclude others from making, using,
offering for sale or selling the invention in the United States or importing the
invention into the United States.  What is granted is not the right to make,
use, offer for sale, sell or import, but the right to exclude others from
making, using, offering for sale, selling or importing the invention.  Once a
patent is issued, it is up to the patentee to enforce the patent.  We cannot
guarantee that we will discover any or all infringements of our patent rights.

      We generally enter into confidentiality, license and non-disclosure
agreements with our employees, licensees and outside consultants that seek to
limit the use and distribution of our proprietary materials.  The royalty income
that we receive under existing license agreements is not material.

VENDORS

      We purchase raw materials from various vendors.  Currently, we can obtain
the component parts necessary for the manufacture of our products and equipment
from a variety of sources.  Furthermore, no single vendor sells us more than 10%
of our total raw material purchases.  Nevertheless, as technology improves,
certain component parts may become obsolete and our vendors may discontinue
their production of such parts.  If this occurs, we may not be able to obtain
these necessary component parts from alternative sources.  As a result, we may
be forced to design around these parts or make a one time lifetime purchase of
discontinued parts so that we are able to continue producing our products and
equipment.

                                        9
<PAGE>
EMPLOYEES

      As of March 31, 2003 we had approximately 81 full-time employees.  Our CRL
division, located in Tempe, Arizona employs approximately 10 persons.  Our Orban
division, located in San Leandro, California employs approximately 65 persons.
Our employees are not represented by a labor union.  We consider our relations
with our employees to be good. Our Orban Europe office located in Ludwigsburg ,
Germany employs approximately 6 persons.

RECENT EVENTS

      On March 27, 2003, we entered into an agreement with Harman that will
allow a restructuring of the Harman debt where the Company will privately place
$1.5 million in common stock for cash consideration prior to April 30, 2003. The
Company will then make a $1 million cash principal payment on its outstanding
debt to Harman. Harman will allow the Company to retain the cash raised by the
sale of its common stock in excess of the payment to Harman. Harman will agree
to exchange $3.5 million principal amount of the debt owed to Harman by the
Company and its outstanding warrant to purchase shares of CRLI common stock, for
a number of shares of CRLI common stock such that Harman will own 19% of the
then-outstanding shares of CRLI common stock on a fully-diluted basis after
giving effect to the private placement of equity securities by CRLI referred to
in paragraph 1 above. The shares of CRLI common stock issued to Harman would be
subject to (i) a registration rights agreement with terms similar to the
registration rights granted to Harman in the warrant to be surrendered,
including multiple demand rights, and (ii) anti-dilution protection for
issuances of equity securities following the restructuring.

      Harman will exchange the remaining $3.982 million plus accrued interest
due from the Company into a single, senior note with an interest fixed at 1.5%
above the prime rate. Interest will be paid monthly. Mandatory principal
payments will also be required on the anniversary of restructuring for the next
five years at the rate of $250,000 per year for the first two years, $500,000
per year for the following two years, and the balance due at the balance due at
the end of the five years. The transaction is conditioned upon $1,000,000
principal payment prior to April 30, 2003.

      Previously, we were obligated to pay Solectron GmbH $34,555 per month
through July 2004. The first monthly payment of $34,555 was made August 14, 2002
with subsequent payments due and payable on the 15th of every month. On November
11, 2002, we and Solectron executed a letter of understanding in connection with
a Settlement Agreement under which Solectron has allowed us to defer the October
15, 2002; November 15, 2000 and the December 15, 2002 payments.  The three
deferred payments where to be made over the period of one year beginning in
January 2003, increasing the installments to $43,194 per month over the same
period of time,(through July 2004). Beginning in January 2004, the installments
where to revert to $34,555 per month until the balance is paid in full July
2004.

      On March 4, 2003, the Company and Solectron GmbH agreed to defer the
payments on the note until March 15, 2003, and where the Company would commence
making principal and interest payments payable in  $15,000 monthly installments
though August 15, 2003. Beginning September 15, 2003, the Company will increase
its principal and interest monthly installments to $40,068. Subsequent monthly
installments will be reduced each month by $194 effectively discounting the
monthly principal and interest payments due and payable until December 15, 2004,
when the company will make its final installment of $7,403.20.
                                      10
<PAGE>
      As of February 14, 2003, Berthold Burkhardtsmaier is no longer Vice
President of Europe Operations. Mr. Burkhardtsmaier still remains a member of
the Board of Directors. Berthold Burkhardtsmaier was Dialog4's managing
director, and had become our Vice President of European Operations and was
appointed to our board of directors in connection with the acquisition of the
assets of Dialog4 System Engineering GmbH ("Dialog4").  Dialog4, a German
corporation based in Ludwigsburg, Germany, is a worldwide leader in ISO/MPEG,
audio, ISDN, satellite transmission, networking and storage. Dialog4 has been
designing and manufacturing equipment for the codec market for over ten years.
Its products, available in Europe since 1993, include the MusicTaxi codec for
encoding and decoding audio and data over TCP/IP on the Internet, ISDN and
satellite.

                                       11
<PAGE>
ITEM 2.  DESCRIPTION OF PROPERTY

     On December 10, 2002, we sold our building located at 2522 W. Geneva,
Tempe, AZ 85258 for $679,499.The building was approximately 10,300 square feet
on a 37,500 square foot parcel of land in Tempe, Arizona that currently housed
our executive, administrative, sales, manufacturing and research facilities. The
proceeds where used to pay off the remaining principal mortgage balance of
$333,251 and some short-term debt.

     On January 02, 2003, the company entered into an informal lease of the
facilities at 1330 W. Auto Drive, Tempe, AZ, from Formosa International Systems
Company, Inc. dba Ever Perfect Systems for a term no less than 2 years and no
more than 10 years, with a rent of $24,500 per month, payable $13,500 in cash
and $11,000 in authorized but unissued shares of CRLI common stock valued of the
common stock on the market for the preceding month before payment. No formal
lease has yet been signed. The new Tempe location will house our executive,
administrative, sales, manufacturing and research staff.

     We lease the manufacturing and office facilities occupied by our Orban
division in San Leandro, California.  The current lease, which was entered into
by a predecessor of Orban, Inc. in 1989 and assumed by us when we acquired the
assets of Orban in 2000, is for 57,013 square feet, of which 20,340 square feet
is subleased to an unrelated third party (a net of 36,673 square feet being
retained by us).  The lease, which expired November 30, 2001, required lease
payments of $43,000.00 per month during 2001.  We received $6,915.60 per month
under the sublease during 2001. We have renewed the lease for the San Leandro
facility.  The term of the new lease is for a period of 60 months commencing on
January 1, 2002.  The new lease is for 33,777 square feet and requires payments
of approximately $27,022 per month during 2002.  Subsequently, the monthly
payments will increase at a rate of 4% annually.

     On January 18, 2002 we assumed the office facility lease in Ludwigsburg,
Germany when we purchased the assets of Dialgo4 Systems Engineering, GmbH. It is
a month to month lease for approximately 750 square feet for $2,700 a month.


ITEM 3.  LEGAL PROCEEDINGS.

     We are not currently involved in any material legal proceedings.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     Not applicable.

                                       12
<PAGE>
                                     PART II

ITEM  5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     Our common stock is quoted on the OTC Bulletin Board of the National
Association of Securities Dealers (NASD) under the symbol "CRLI."

     The following table sets forth the quarterly high and low bid prices for
our common stock as reported by the NASD's OTC Bulletin Board.  The prices
reflect inter-dealer prices, without retail mark-up, mark-down or commission,
and may not represent actual transactions.

          CALENDER QUARTER               High       Low
          ----------------               -----      -----
          2000
            First Quarter                $6.81      $2.31
            Second Quarter                3.50       1.15
            Third Quarter                 1.30       0.55
            Fourth Quarter                1.05       0.67
          2001
            First Quarter                 1.33       0.69
            Second Quarter                2.29       1.01
            Third Quarter                 1.40       0.55
            Fourth Quarter                1.02       0.50


     As of March 31, 2003, there were 3,806,846 shares of common stock
outstanding held by approximately 289 shareholders of record.  We have not paid
any cash dividends on our common stock and pursuant to the terms of our loan
agreement with Harman, we cannot pay cash dividends while our debt to Harman
remains outstanding.


RECENT SALES OF UNREGISTERED SECURITIES

     Set forth below is information concerning sales of our common stock (or
transactions deemed to be sales) during the year ended December 31, 2001 that
were not registered under the Securities Act of 1933, as amended (the "Act").
All such securities are restricted securities and the certificates bear
restrictive legends.

     On January 18, 2002, our wholly owned subsidiary, CRL Systems, Inc. doing
business as Orban, Inc., acquired the assets of Dialog4 System Engineering GmbH,
a worldwide leader in ISO/MPEG, audio, ISDN, satellite transmission, networking
and storage.  Orban/CRL purchased the assets of Dialog4 pursuant to an Asset
Sale and Purchase Agreement for $2 million, comprised of 1,250,000 shares of our
common stock, valued at $1.00 per share, and $750,000 cash.  In connection with
this transaction, we relied on the exemption from registration under Section
4(2) of the Act.

                                       13
<PAGE>
ITEM  6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

      The following discussion of our financial condition and results of
operations should be read together with the financial statements and the
accompanying notes included elsewhere in this report.  This discussion contains
statements about future events, expectations, risks and uncertainties that
constitute forward-looking statements, as do discussions elsewhere in this
report.  Forward-looking statements are based on management's beliefs,
assumptions and expectations of our future economic performance, taking into
account the information currently available to management.  These statements are
not statements of historical fact. Forward-looking statements involve risks and
uncertainties that may cause actual results, performance or financial condition
to differ materially from the expectations of future results, performance or
financial condition we express or imply in any forward-looking statements.  The
words "believe," "may," "will," "should," "anticipate," "estimate," "expect,"
"intend," "objective," "seek," "strive" or similar words, or the negative of
these words, identify forward-looking statements. Our actual results may differ
materially from those anticipated in those forward-looking statements as a
result of certain factors, including, but not limited to, those described below
under this Item 6, "Management's Discussion and Analysis or Plan of Operation -
Risk Factors."  We qualify any forward-looking statements entirely by these
cautionary factors.

OVERVIEW

      We develop, manufacture and market high-quality electronic audio
processing, transmission encoding and noise reduction equipment for the
worldwide radio, television, cable, Internet and professional audio markets. In
recent periods, we have acquired the assets of other companies within our
industry or in related industries into which we desire to expand.  On May 31,
2000, we acquired the assets of Orban, Inc., a producer of audio editing and
processing equipment.  On May 31, 2001, we acquired the assets of Avocet
Instruments, Inc., a supplier of quality audio receivers and coders for the
television and post-production industry.  On January 18, 2002, we acquired the
assets of Dialog4 System Engineering GmbH, a worldwide leader in ISO/MPEG,
audio, ISDN, satellite transmission, networking and storage.  The results of our
acquisition of Dialog4 are only reflected for the fiscal year ended December 31,
2002 in the financial statements included in this report

     We are still in the process of integrating the operations of our most
recently acquired operations, including integration of our financial accounting
and management information systems.  Once this integration is complete, we
expect to benefit from cost savings produced by combined research and
development, marketing, sales and administration, manufacturing efficiencies and
cross-selling opportunities.  Our recent acquisition of the Dialog4 product line
has led to the establishment of our new Orban Europe division offices in
Ludwigsburg, Germany.  We now face the challenge of integrating our financial
accounting and management information systems with those of Dialog4 as well as
the challenge of overcoming obstacles produced as a result of different
corporate cultures, a different legal system and different accounting and
reporting regulations. We will also face new risks arising from foreign currency
fluctuations.

      The events of September 11, 2001, have had a significant impact on the
market for audio processing equipment.  We have experienced a reduction in
orders for new audio equipment from many radio and television stations. We
believe this reduction is due in part to the decrease in advertising revenue
realized by these stations.  We expect this trend to continue at least through
the third quarter of 2003.

                                       14
<PAGE>
      We believe the increased consolidation within the radio and television
industries will provide some potential opportunities for our Company.  For
example, we believe that as larger radio and television stations purchase
smaller stations, orders for new equipment will increase in order to upgrade
these smaller stations which would otherwise have put off purchases of such
upgraded equipment.

     We have expanded into the high-quality codec market in order to complement
our existing product line.  The term "codec" is derived from the words "enCOde"
and "DECode" and represents a technology utilized in the transfer of digital
data.  The radio and television broadcast industries use codec technology to
transmit voice and music from studio to studio, or from a remote broadcast
location to a studio, using Integrated Services Digital Network (ISDN) telephone
lines, the Internet, computer networks and satellite links. Our acquisition of
the assets of Dialog4 System Engineering GmbH on January 18, 2002, has
accelerated our expansion into the codec market by immediately increasing the
existing customer base for our OptiCodec line of products.  At the same time,
this acquisition increased the existing customer base for all of our other
products.  The market for codec technology is rapidly developing and the demand
for information over an ever-crowded spectrum is increasing. We are hopeful that
our OptiCodec product line will eventually add 20% to our net sales. At this
time, however, these products have had no material impact on our sales.

      In spring of 2001, we introduced the Optimod-PC which is designed for use
in digital audio broadcasting (DAB), Internet web/netcasting and recording
applications.  The Optimod-PC is a PCI sound card (designed to run on Windows
2000 and Windows XT) with on-board digital signal processing that is suitable
for both live streaming and on-demand programming.  Internet audio applications
are composed of two general categories: on-demand and streaming. The market for
audio streaming is currently hampered by uncertainty with respect to the payment
and allocation of proposed copyright royalty fees and questions concerning the
establishment of revenue-generating models. Nevertheless, the demand for
on-demand audio and web meetings is expected to increase as radio stations and
businesses alike increasingly utilize MPEG-1 Layer 3 (MP3) technology to reach
listeners with digital music and other audio content.  In addition, our
equipment sales may increase in the event that the Federal Communications
Commission approves a plan for U.S. radio stations to begin broadcasting in
digital by means of In-Band On-Channel (IBOC) technology.  We plan to introduce
several new products in the third quarter of 2002 that will be geared toward the
IBOC market.

      We are hopeful that the growing Digital Television (DTV) market will
provide a new market for us in the coming years.  DTV has different meanings
depending on whether one is discussing production and post-production or
distribution and transmission.  With respect to distribution and transmission,
it means sending audio and video digitally to its destination. DTV is under
development around the world and is being phased in domestically with over 400
local television stations on the air and broadcasting digitally as of June 2002
and an additional 800 stations in the U.S. alone remaining to convert to DTV
format.

      Our Optimod 6200 is designed to meet what we believe is the primary need
of digital broadcasters (DAB, DTV and web/netcasters), specifically the delivery
of clean, crisp, consistent and comfortably-listenable sound that will enable
such broadcasters to attract listeners and compete in their respective markets.
Because the digital standards are still evolving, the 6200 was built to be
flexible and adaptive to future modifications in the industry.

                                       15
<PAGE>
      Despite the ongoing conversion to digital transmission systems, many
broadcasters, engineers and consultants continue to support analog technology,
and many of our competitors continue to build and sell analog broadcast
equipment.  We have not seen an increase in demand for our CRL line of products,
but we expect continued and stable demand for such products in 2002.

      We incurred losses of $2,135,039 and $2,046,640 during the years ended
December 31, 2002 and 2001, respectively.  Our deteriorating financial results
and reduced liquidity caused us to renegotiate our $8.5 million loan agreement
with Harman.  Under the terms of the debt restructure, Harman can demand at any
time that we immediately pay in full the outstanding balance.  Should this
happen, we would immediately be forced to file for protection under Chapter 11
of the United States Bankruptcy Code.  Our inability to pay the $8.5 million
debt to Harman should payment be demanded, our difficulties in meeting our
financing needs and our negative working capital position have resulted in our
independent public accountants adding a going concern emphasis paragraph to
their report by including a statement that such factors raise substantial doubt
about our ability to continue as a going concern.  In addition to our efforts to
reduce costs and increase sales, we are currently seeking sources of long-term
financing.  However, the inclusion of a going concern emphasis paragraph
generally makes it more difficult to obtain trade credit or additional capital
through public or private debt or equity financings.

      On March 27, 2003, we entered into an agreement with Harman that will
allow a restructuring of the Harman debt where the Company will seek to
privately place $1.5 million in common stock for cash consideration prior to
April 30, 2003. The Company will then make a $1 million cash principal payment
on its outstanding debt to Harman. Harman will allow the Company to retain the
cash raised by the sale of its common stock in excess of the payment to Harman.
Harman will agree to exchange $3.5 million principal amount of the debt owed to
Harman by the Company and its outstanding warrant to purchase shares of CRLI
common stock, for a number of shares of CRLI common stock such that Harman will
own 19% of the then-outstanding shares of CRLI common stock on a fully-diluted
basis after giving effect to the private placement of equity securities by CRLI
referred to in paragraph 1 above. The shares of CRLI common stock issued to
Harman would be subject to (i) a registration rights agreement with terms
similar to the registration rights granted to Harman in the warrant to be
surrendered, including multiple demand rights, and (ii) anti-dilution protection
for issuances of equity securities following the restructuring.


      Harman will exchange the remaining $3.982 million plus accrued interest
due from the Company into a single, senior note with an interest fixed at 1.5%
above the prime rate. Interest will be paid monthly. Mandatory principal
payments will also be required on the anniversary of restructuring for the next
five years at the rate of $250,000 per year for the first two years, $500,000
per year for the following two years, and the balance due at the balance due at
the end of the five years. The transaction is conditioned upon the $1,000,000
principal payment prior to April 30, 2003.

                                       16
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS

       In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS
Nos. 141 and 142 ("SFAS 141" and "SFAS 142"), "Business Combinations" and
"Goodwill and Other Intangible Assets."  SFAS 141 replaces APB Opinion No. 16
and eliminates pooling-of-interests accounting prospectively.  It also provides
guidance on purchase accounting related to the recognition of intangible assets
and accounting for negative goodwill.  SFAS 142 changes the accounting for
goodwill from an amortization method to an impairment-only approach.  Under SFAS
142, goodwill will be tested at least annually and whenever events or
circumstances occur indicating that goodwill might be impaired.  SFAS 141 and
SFAS 142 are effective for all business combinations initiated after June 30,
2001.

      We have adopted FASB 142, and accordingly amortization of goodwill
recorded for business combinations consummated prior to July 1, 2001 has ceased.
Companies are required to adopt SFAS 142 for fiscal years beginning after
December 15, 2001.  We adopted SFAS 142 on January 1, 2002. SFAS 142 requires
that goodwill be tested for impairment, at least annually, and shall not be
amortized.  The goodwill impairment test is a two-step process. The first step
compares the fair value of a reporting unit with its carrying amount.  If the
fair value exceeds the carrying amount, goodwill of the reporting unit is
considered not impaired and no further testing is necessary. If the fair value
is less than the carrying value, the second step must be performed to determine
the amount of the impairment.  The second step compares the implied fair value
of the reporting unit goodwill with the carrying amount of that goodwill.  If
the carrying amount of the reporting unit goodwill exceeds the implied fair
value of that goodwill, an impairment loss is recognized in an amount equal to
that excess.  Any loss resulting from the transitional impairment test will be
reflected as a change in accounting principle.

      The Company has determined the estimated fair value of the Orban reporting
unit with a view to determining whether the goodwill has been impaired under
these new rules. Management has concluded that the estimated fair value of the
Orban reporting unit is in excess of its carrying value as of January 1, 2002.
The fair value has been estimated based on the customer base, cash flows and
existing product line of the Orban reporting unit. As a result of this review
the Company has established that no impairment loss is required to be recorded
upon the adoption of SFAS 142.

      At the time that an acquisition is made, the Company records each asset
acquired and each liability assumed at its estimated fair value, which estimate
is subject to future adjustment when appraisals or other valuation data are
obtained.  The excess of (i) the total consideration paid for the acquired
assets over (ii) the fair value of the assets acquired, fewer liabilities
assumed, is recorded as goodwill.  As of December 31, 2002, the Company has no
identifiable intangible assets with definite lives.

      At December 31, 2001 and December 31, 2002, the Company reported
$5,734,180 and $7,476,008, respectively, of net goodwill on its consolidated
balance sheets.  At both dates, both amounts included $5,719,142 for the
acquisition of the assets of Orban, Inc. and $15,038 for the acquisition of the
assets of Avocet Instruments, Inc.  In addition, the December 31, 2002 balance
includes $1,741,828 for the acquisition of the assets of Dialog4 System
Engineering GmbH.  The following table presents the impact of goodwill
amortization on net income (loss) and net income (loss) per share for the year
ended December 31, 2001:

                                       17
<PAGE>
For the Year Ended December 31, 2001     Net Loss      Basic EPS  Diluted EPS
------------------------------------   ------------    ---------  -----------
Reported Net Loss                      ($2,046,640)      ($0.88)     ($0.88)
Add back: Goodwill amortization          1,056,999        $0.45       $0.45
Adjusted                                  (989,641)      ($0.43)     ($0.43)


      In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 143 ("SFAS 143"), "Accounting for Obligations Associated with the
Retirement of Long-Lived Assets."  SFAS 143 establishes accounting standards for
the recognition and measurement of an asset retirement obligation and its
associated asset cost.  It also provides accounting guidance for legal
obligations associated with the retirement of tangible long-lived assets.  SFAS
143 is effective in fiscal years beginning after June 15, 2002, with early
adoption permitted.  The Company plans to adopt SFAS 143 effective January 1,
2003.  The Company has not determined the effect of adopting SFAS 143 on its
consolidated results of operations or financial position.

      In October 2001, the FASB issued Statement of Financial Accounting
Standards No. 144 ("SFAS 144"),  "Accounting for the Impairment or Disposal of
Long-Lived Assets."  SFAS 144 establishes a single accounting model for the
impairment or disposal of long-lived assets, including discontinued operations.
SFAS 144 superseded Statement of Financial Accounting Standards No. 121,
"Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," and APB Opinion No. 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions." The provisions of
SFAS 144 are effective in fiscal years beginning after December 15, 2001, with
early adoption permitted, and in general are to be applied prospectively. The
Company adopted SFAS 144 effective January 1, 2002 and has determined that there
will be no impact to this standard on its consolidated results of operations and
financial position.

      In April 2002, the FASB approved SFAS No. 145, "Rescission of FASB
Statements No. 4, 44 and 64, amendment of SFAS No. 13 and Technical
Corrections".  SFAS No. 145 rescinds previous accounting guidance, which
required all gains and losses from extinguishment of debt to be classified as an
extraordinary item.  Under SFAS No. 145, classification of the debt
extinguishment depends on the facts and circumstances of the transaction. SFAS
No. 145 is effective for fiscal years beginning after May 15, 2002.

      In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities."  SFAS No. 146 requires recognition
of costs associated with exit or disposal activities when they are incurred
rather than at the date of a commitment to an exit or disposal plan. Examples of
costs covered by the standard include lease termination costs and certain
employee severance costs that are associated with a restructuring, discontinued
operation, plant closing, or other exit or disposal activity. SFAS No. 146 is to
be applied prospectively to exit or disposal activities initiated after December
31, 2002.

      In October 2002 the FASB issued SFAS 147, "Acquisitions of Certain
Fiancial Intstitutions". SFAS 147 addresses financial accounting and reporting
for the acquisition of all or part of a financial institution. Since SFAS 147 is
not relevant to the Company's business this statement will have no impact on the
Company's financial position or results of operations.

                                       18
<PAGE>
      In December 2002 the FASB issued SFAS 148 "Accounting for Stock Based
Compensation". This SFAS amends SFAS 123 and provides new guidance regarding the
transition when an entity changes from the intrinsic value method to the fair
value method of accounting for employee stock based compensation cost.
Additional information is now required to be disclosed regarding such cost in
the financial statements of public companies.  SFAS 148 will not have a material
impact on the Company's financial statements.



SALES TO MAJOR CUSTOMERS AND EXPORT SALES

      We sell our products primarily through wholesale distributors and dealers.
We recognize revenue generally upon shipment of products to customers.  In 2002,
one of our largest customers, Harris Corporation, accounted for approximately
14% of net sales.  In 2001, the same customer accounted for approximately 19% of
net sales.  Broadcast Supply Worldwide accounted for just over 10% of our net
sales for 2002 representing an increase of 2% over 2001. Our dependence on a
small number of relatively large customers increases the magnitude of
fluctuations in operating results particularly on a period to period, or period
over period, comparison basis.

      International sales in 2002 and 2001 totaled $6,200,809 and $6,702,430,
respectively.  Prior to our acquisition of the assets of Dialog4 System
Engineering GmbH on January 18, 2002, we required that all export sales be paid
in U.S. currency. After the acquisition was completed we require that sales out
of our German office be paid in either Euros or USD. All other export sales are
in U.S currency.

     Our export sales by region are as follows:

     Region                     2002       %           2001       %
     --------------------------------------------------------------
     Europe                  $2,158,614   44%        $2,676,880   40%
     Pacific Rim              1,454,145   29          2,217,607   33
     Latin and South America    510,326   10            712,026   11
     Canada and Mexico          650,181   13            908,442   14
     Other                      180,592    4            187,475    3
                             ----------  ----       ----------  ----
     Total                   $4,953,858  100%       $6,702,430  100%
                             ==========  ====       ==========  ====

      In recent years, the radio and television industry in the United States
has experienced a great deal of consolidation of ownership.  In the last five
years alone, four large corporations have acquired the vast majority of radio
stations in the United States.  This control gives these corporations
substantial ability to demand discounts from equipment distributors and
manufacturers.

      The Latin and South America market consists largely of privately owned
radio stations, and we do not foresee any changes in this trend.

       While radio ownership in the Western European market is predominantly
private, this market is largely mature and is not characterized by a large
amount of growth.  Conversely there is some potential

                                       19
<PAGE>
growth in the Eastern European market as more and more radio and TV stations
become private and commercialized however we can not predict the rate at which
this market will grow nor the size.

      The Indian market is beginning to implement private radio ownership, and
this market may become more substantial and present opportunities for us in the
future.  However, we cannot predict the rate at which this market will grow nor
the ultimate size of this market.

      Given the price sensitivity in the Asian markets (including China), we
expect that our analog products, as opposed to our digital products, will be
more suited to such markets.

                                       20
<PAGE>
RESULTS OF OPERATIONS

      The following table sets forth for the periods indicated certain summary
operating results:
                                                     Year Ended December 31,
                                                   ---------------------------
                                                       2002            2001
                                                   -----------      ----------
     Revenues:
       Net sales                                   $10,772,593     $13,066,365
       Other income                                    455,649          32,221
                                                   -----------      ----------
         Total revenues                            $11,228,242     $13,098,586
                                                   ===========      ==========
     Gross profit on net sales                      $4,866,086      $6,476,846
     Gross profit margin                                    45%             50%
     EBITDA (1)                                      $(544,432)       $501,035
     Net cash provided by operating activities         $20,561        $153,406
     Net cash provided by (used in)
       investing activities                           $648.983        $(58,779)
     Net cash used in financing activities           $(736,038)       $(85,935)
     Net loss                                      $(2,135,039)    $(2,046,640)
     Net loss as a percent of net sales                    (20%)           (16%)
     Loss per share - basic and diluted                 $(0.58)         $(0.88)

(1) EBITDA is defined as earnings before interest, taxes, depreciation and
amortization.  Companies and analysts do not calculate this measure in the same
fashion and, as a result, the measure presented may not be comparable to
similarly titled measures reported by other companies.  EBITDA should be
considered in addition to, not as a substitute for or superior to, operating
income, cash flows or other measures of financial performance prepared in
accordance with accounting principles generally accepted in the United States.
This information is not intended to assist investors in an analysis of our
liquidity because there are a number of uses of cash that are excluded from the
EBITDA measurement, as reported in our statement of cash flows.  Rather,
investors may wish to use this information as one of a number of points of
comparison between our reported net loss in the years 2002 and 2001.  We have
included this information to highlight the fact that changes in interest
expense, depreciation and amortization between 2002 and 2001 had a significant
impact on our reported net loss.  None of the funds depicted by the EBITDA
measure above are available for management's discretionary use.

For the year ending December 31, 2003, our principal working capital
requirements will be the payment of normal recurring operating costs and
scheduled debt service payments.  Management believes that the Harman
restructure will help us meet these requirements from expected operating cash
flows.

                                       21
<PAGE>
YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

      Net Sales.  Net sales for the year ended December 31, 2002 were $10.8
million compared to $13.1 million in 2001 reflecting a decrease of 18%. The
decrease in net sales was primarily attributable to a 50% decrease in demand
from one of our largest customers along with the general decreased worldwide
demand for our products. Our Orban division reported net sales for years ended
December 31, 2002 and 2001 to be $10.1 million and $12.1 million, respectively.
In 2002 and 2001, our Orban division accounted for 93% and 92%, respectively, of
our net sales while our CRL division accounted for the remaining 7% and 8%,
respectively.  Included in our Orban division is our Ludwigsburg Germany
location which reported net sales of $1.0 million for 2002.

      Our CRL division reported net sales of $703,000 for the year ended
December 31, 2002 as compared to $975,000 in 2001, representing a decrease of
28%.  This decrease was the result of decreased demand from one customer
overseas.  We are uncertain whether this decreased demand will continue, but
generally, we expect continued stable demand across the CRL product lines in
2003.

      Sales for the years ended December 31, 2002 and 2001 were conducted
primarily through wholesale distributors and dealers.  In 2002, one of our are
largest customers, Harris Corporation, accounted for approximately 14% of net
sales.  In 2001, the same customer accounted for approximately 19% of net sales.
Broadcast Supply Worldwide accounted for just over 10% of our net sales for 2002
representing an increase of 2% over 2001.

      International sales for the years ended December 31, 2002 and 2001
totalled $6,200,809, and $6,702,430 respectively.  International sales
represented 58% of the total net sales for the year ended December 31, 2001 as
compared to 51% for the year ended December 31, 2001.

      Our introduction of new products during the year ended December 31, 2001
has had no material impact on our net sales for that period. However, for the
year ended December 31, 2002, nine percent of our net sales is attributable to
the acquisition of our Dialog4 assets in January of 2002. Had we not included
this new product line as part of our net sales our net sales would have
decreased by 25% instead of 18%.

      Gross Profit.  Gross profit for the year ended December 31, 2002 was 45%
compared to 50% for the same period in 2001. The decrease in sales resulted in a
gross profit of $4.9 million in 2002 compared to $6.5 million in 2001. The
decrease was primarily attributable to decreased production caused by a
decreased demand for our products coupled with an increase in our fixed expenses
as a result of the purchase of the assets of Dialog4. Contributing factors also
include a percentage increase in our variable expenses as a result of smaller
quantity material purchases creating a premium in the price along with higher
freight charges to expedite parts shipments. Another factor is due to an
increased in the inventory reserve by $168,000. Gross profit for our Orban
Europe location (Dialog4) was 47% for the year ended December 31, 2002.



      Selling, General and Administrative.  Total selling, general and
administrative expenses ("SG&A") in 2002 was $4.5 million, a decrease of 4% as
compared to the $4.7 million reported in 2001.  As a percentage of net sales,
SG&A increased 6% to 42% for the year ended December 31, 2002 from 36% as
compared to the same period in 2001. The decrease in total SG&A expense is due
in part to the variable component of SG&A(other domestic and international sales
and marketing expenses) associated with sale of products. The Company decreased
the use of outside advertising agencies and cut back on temporary personnel. The
fixed component of SG&A has increased due to the additional personnel in sales,
marketing, administration and costs related to operating the Orban Europe office
following the January 18, 2002 acquisition.

                                       22
<PAGE>
      Research and Development.  Research and development expense was $1.4
million for the years ended December 31, 2002 and 2001.  As a percentage on net
sales, research and development increased 2% from 11% in 2001 to 13% 2002. The
increased percentage was due to the increase in development projects targeting
replacement products, existing products and new products.

      Other (Income) Expense.  Other expense, net for the year ended December
31, 2002 was $704,000 of which $352,000 represents a gain on the sale of the
building in Tempe and $1,019,000 represents interest expense to Harman
International Industries, Inc. in connection with the seller carry-back loan
that financed a portion of the purchase price that we paid for the Orban assets.
For the year ended December 31, 2001 other expense, net was $1,038,000 of which
$1,020,000 represents interest expense to Harman International Industries, Inc.
Interest expense for the year ended December 31, 2002 was $1,160,000 as compared
to $1,070,000 for the same period in 2001, reflecting an increase of 8%. The
Harman interest was virtually unchanged from 2001. The increase in interest
expense represents the interest associated with the Amendment to the Asset Sales
and Purchase Agreement that we entered into on April 8, 2002 and the interest
expense associated with the Material Liability Agreement between Dialog4 and
Solectron GmbH that was assumed by the company as part of the Settlement
Agreement that we executed with Solectron.

      Operationally, we are reporting a $544,000 loss in 2002 before interest,
taxes, depreciation and amortization (EBITDA) which represents approximately
(5%) of the total net sales in 2002 as compared to 2001 in which we reported a
$501,000 profit before interest, taxes, depreciation and amortization (EBITDA)
representing 4% of net sales.  The decrease in EBITDA is primarily due to the
reduction in sales.

      Net Loss.  In 2002, net loss increased by $88,000 to $2,135,000 as
compared to $2,047,000 in 2001.  Excluding the impact of the non-cash items, we
would have reported net loss of $1,770,000 compared to net income of $47,000 in
2001.

      Non-cash income and expense items in 2002 were as follows:

           $168,000     Increase in inventory reserve
            108,400     Stock compensation
              9,700     Increase in provision for uncollectible accounts
           (351,800)    Gain on sale of building
            430,900     Depreciation
           --------
           $365,200     Total (representing 29% of the net loss for the year)
           ========

      Non-cash expense items in 2001 were as follows:

           $533,000     Increase in inventory reserve
             84,000     Increase in provision for uncollectible accounts
          1,057,000     Amortization of goodwill
            429,000     Depreciation
         ----------
         $2,103,000     Total (representing 103% of the net loss for the year)
         ==========

      The decrease in amortization from 2001 to 2002 reflected in the charts
above resulted from the adoption of FAS 142, Goodwill and Other Intangibles.

                                       23
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

      We had negative net working capital of approximately $8.7 million at
December 31, 2002, and the ratio of current assets to current liabilities was
..27 to 1. At December 31, 2001, we had negative net working capital of
approximately $6.6 million and a current ratio of .37 to 1.  The decrease in
working capital is in part a result of our increased debt associated with our
acquisition of the Dialog4 assets and in part from an increase in our in our
payables and accrued liabilities.

      The negative working capital primarily resulted from the conversion to
demand notes of the $3.5 million short-term note and the $5 million long-term
notes payable to Harman.  The notes are payable on December 31, 2003 or upon the
earlier demand of Harman, as specified in the Second Amendment to Credit
Agreement that we entered into with Harman effective May 1, 2002.

             Specified Payment Date   Payment Amount
             ----------------------   --------------
             April 30, 2002           $1,250,000
             June 30, 2002               250,000
             September 30, 2002          250,000
             December 31, 2002           250,000
             March 31, 2003            3,000,000

      As described in Item 1 under the recent events section, Harman and the
Company are negotiating a transaction by which a principal reduction will be
made by April 30, 2003.

      Our substantial obligation to Harman may have important consequences for
us, including the following:

      * Our ability to continue as a going concern will depend in part on
        whether Harman demands payment on the $8.5 million debt, or any portion
        thereof;
      * A significant portion of our cash flow from operations will be dedicated
        to servicing our debt obligations and will not be available for other
        business purposes;
      * The terms and conditions of our indebtedness limit our flexibility in
        planning for and reacting to changes in our business, and in making
        strategic acquisitions;
      * Our ability to obtain additional financing in the future for working
        capital, capital expenditures and other purposes may be substantially
        impaired; and
      * Our substantial leverage may make us more vulnerable to economic
        downturns and competitive pressures.

      Our ability to meet our debt service obligations and reduce our total
indebtedness to Harman depends in part on our future operating performance. Our
future operating performance will depend on our ability to expand our business
operations by growing our core audio processing business, expanding our product
offerings and penetrating new and emerging markets, which we anticipate will
require additional financing.  In addition, our future operating performance
will depend on economic, competitive, regulatory and other factors affecting our
business that are largely beyond our control. If we are unable to expand our
business operations as planned, we may not be able to service our outstanding
indebtedness to Harman.

      On May 1, 2002, the Company entered into a Second Amendment to Credit
Agreement with Harman under which the long- and short-term demand notes were
amended and restated to remove the requirement for quarterly payments on the
long-term note and to extend the maturity dates for the notes to December 31,
2003, unless Harman demands payment at an earlier date. Interest only payments
remain payable monthly at 12 percent per annum for both notes and are also due
on demand.

                                       24
<PAGE>
      On August 19, 2002 the Company executed a Letter of Agreement to extend
the interest payments due July 15, 2002, August 1, 2002 and August 15, 2002 each
in the amount of $42,410, for a total of $127,230 to be payable to Harman on or
before November 15th, 2002.

      In November, 2002 the Company and Harman verbally agreed to further extend
the interest payments due July 15, 2002, August 1, 2002 and August 15, 2002 each
in the amount of $42,410 and added the interest payments due September 15, 2002
along with the semi monthly payments due in October, November, each in the
amount of $42,410 for a total that amounts to $339,280 to be payable to Harman
on or before December 6, 2002. The verbal agreement will be formally documented
at a later date.

      As of December 31, 2002 we are in arrears by fewer than eight interest
installments in an aggregate amount of $324,190. As of part of the Debt
Restructure announced on March 27, 2003 Harman has agreed to add this unpaid
interest to the total principal due (after receipt of the $1 million in
principal and conversion of the $3.5 million of debt to equity stated in the
recent debt restricting agreement between Harman and the Company).

      On January 18, 2002, with Harman's consent, we acquired the assets of
Dialog4 System Engineering GmbH.  We purchased the assets of Dialog4 pursuant to
an Asset Sale and Purchase Agreement for $2 million, comprised of 1,250,000
shares of our common stock, valued at $1.00 per share, and $750,000 cash to be
paid at a later date either by us from our working capital or by our President
and Chief Executive Officer, Charles Jayson Brentlinger.  On April 8, 2002, we
executed an amendment to the Asset Sale and Purchase Agreement with Dialog4. The
amended agreement extends the term of our payments to Dialog4 over twenty months
while reducing the amount of the monthly payment installments to $37,500 plus
interest on the remaining principal balance at a rate of 10 percent per annum.
The monthly installments of principal and interest are due and payable on the
twentieth day of each month commencing April 20, 2002.

      As a result of our acquisition of the Dialog4 assets, We are further
obligated to pay Solectron GmbH $34,555 per month through July 2004. The first
monthly payment of $34,555 was made August 14, 2002 with subsequent payments due
and payable on the 15th of every month. On November 11, 2002, the Company and
Solectron executed a letter of understanding in connection with the Settlement
Agreement under which Solectron has allowed us to defer the October 15, 2002;
November 15, 2000 and the December 15, 2002 payments. The three deferred
payments where to be made over the period of one year beginning in January 2003,
increasing the installments to $43,194 per month over the same period of time.
Beginning in January 2004, the installments will revert to $34,555 per month
until the balance is paid in full July 2004.

      We still owe Dialog4 approximately $597,000, payable $37,500 monthly plus
interest, for the purchase of the Dialog4 assets. Effective January 1, 2002, the
Company has also requested a reduction in the amount payable to Dialog4 each
month (without reducing the total amount due) during the time the Company is
required to pay Dialog4's debt to Solectron GmbH, one of Dialog4's creditors
described above. Dialog4 has requested the monthly payments to be made directly
to creditors of Dialog4, and we are currently negotiating with those creditors
for an acceptable payment schedule. There is no assurance that we can achieve a
satisfactory settlement with those creditors.   Dialog4 has demanded payment of
the August, September and October payments (totaling $119,555.33 including
interest) in full by November 13, 2002 unless we can successfully negotiate a
payment schedule to Dialog4's creditors.  If we are unable to do so, it will
need to satisfy or settle the demands of Dialog4 for payment under the original
asset purchase agreement with Dialog4.

                                       25
<PAGE>
      The table below summarizes our contractual commitments under leases, debt
instruments and employment contracts over the next five years.  We have no fixed
commitments to purchase inventory or materials, and no commitment extends beyond
2007.
<TABLE>
<CAPTION>
                                           2003        2004       2005       2006       2007
                                        ---------   ---------  ---------  ---------  ---------
  <S>                                   <C>         <C>        <C>        <C>        <C>
  Debt service                           $103,450     $67,100    $36,526   $278,334   $278,334
  Equipment and property leases           618,264     631,224    350,724    364,752          0
  Employment agreements                   723,560     723,560    301,483
                                        ---------   ---------  ---------  ---------  ---------
  Aggregate excluding obligations to
    Harman and Dialog4                  1,445,274   1,421,884    688,733    643,086    278,334
  Dialog4                                 412,500
  Obligation to Harman                  8,482,000
                                        ---------   ---------  ---------  ---------  ---------
  Total                               $11,504,000  $1,421,884   $688,733   $643,086   $278,334
                                      ===========  ==========   ========   ========   ========
</TABLE>

      Working capital generated from 2003 operations will be used to service our
commitments as detailed above, excluding our obligations to Harman.  Any excess
working capital generated from 2003 operations will be applied to expand our
business operations. The terms of the Harman debt restrict our ability to obtain
financing for these types of expansion expenditures, as well as financing for
other purposes.  Accordingly, our ability to expand will primarily depend on our
ability to generate sufficient working capital from operations.  We will closely
monitor our working capital in 2003 as we evaluate any expenditures related to
expansion.

      Accounts receivable were $646,000 at December 31, 2002 compared to
$641,000 at December 31, 2001.The accounts receivable have been primarily
constant due consistency in our collections coupled with the continued demand
balances for our products. We increased our allowance reserve for the year ended
December 2001 by $84,000 The increase in our reserve for the allowance of
doubtful accounts was attributable to the general economic downturn which began
in the latter half of 2001 and which we expect to continue until at least the
third quarter of 2003.

      Total inventories were $2,305,000 at December 31, 2002 compared to total
inventories of $2,828,000 at December 31, 2001.  The $2,305,000 reported or the
year ended December 31, 2002 includes $670,000 as part of the acquisition of the
Dialog4 assets. The value of inventory decreased $523,000, or 19%, due primarily
to the reduction of inventory on hand. $168,000 of the $523,000 was attributable
to the increase in inventory reserve.

      For the year ending December 31, 2003, our principal working capital
requirements will be the payment of normal recurring operating costs. Management
believes that these requirements can be met from the operating cash flows.

      On May 31, 2000, our wholly owned subsidiary, CRL Systems, Inc., acquired
the assets of Orban, Inc., a wholly owned subsidiary of Harman International
Industries, Inc.  The total stated purchase price was $10.5 million, of which $2
million was paid in cash and the balance of which was paid by means of a
combination of short-term and long-term promissory notes that we issued to
Harman.  On October 1, 2001, we entered into an Amendment to Credit Agreement
with Harman under which both the long-term and the short-term notes were
converted to demand notes payable on the demand of Harman or, if no demand is
sooner made, on the dates and in the amounts specified in the Amended Credit
Agreement.  For a complete discussion of our purchase of Orban and the terms of
our Credit Agreement with Harman, see Item 12, Certain Relationships and Related
Transactions-Acquisition of Orban, Inc.

                                       26
<PAGE>
      Approximately $9,573,000 of our total indebtedness is due and payable by
December 31, 2003, unless with respect to the $8,482,000 due Harman, payment is
demanded at an earlier date.  Our President, Mr. Charles Jayson Brentlinger, has
committed to exercise his outstanding stock options, if necessary, to satisfy a
portion of the Company's debt payment requirements if operating cash flows are
inadequate to retire the debt.  If Mr. Brentlinger exercised all of his options
to purchase shares of our common stock, we would realize gross proceeds of
approximately $1,250,000.  We are actively pursuing opportunities to raise
additional capital through a private equity placement of our common stock, asset
based lending, or a combination of the two.  We have currently engaged HD Brous
& Co., Inc. to advise and assist us in capital raising efforts. We cannot offer
any assurances that we will be able to attract additional capital or that
additional financing, if obtained, will be sufficient to meet our current
obligations.  If we cannot meet our current obligations, our ability to continue
as a going concern will be jeopardized.

      On June 12, 2000, we borrowed $68,387 from a non-management employee to
assist us in the purchase of the assets of Orban.  The unsecured promissory note
evidencing the debt bears interest at 12 percent per annum.  The note was
originally due September 12, 2000 but was extended to September 30, 2001 without
payment of a fee.  In order to further extend the note, we agreed to make 12
monthly installment payments of principal and interest over a one-year period
commencing September 1, 2001.  We did not pay a fee in connection with this
extension.  As part of the agreement, the note continues to bear interest at 12
percent per annum, but is compounded monthly.  As of December 31, 2002, we had
paid a total of $55,447 on the note and the remaining unpaid balance was
$12,940.

                                       27
<PAGE>
RISK FACTORS

      You should carefully consider the following risk factors and all other
information contained in this report in evaluating us and our business. You
should also keep these risk factors in mind when you read and consider the
forward-looking statements in this report and other reports we file with the
SEC.  The risks and uncertainties described below are not the only ones facing
us.  Additional risks and uncertainties that we are unaware of, or that we
currently deem less material, also may become important factors that affect us.

AS A RESULT OF OUR LARGE OUTSTANDING DEBT OBLIGATIONS, WE HAVE SIGNIFICANT
ONGOING DEBT SERVICE REQUIREMENTS WHICH MAY ADVERSELY AFFECT OUR FINANCIAL AND
OPERATING FLEXIBILITY.

      On May 31, 2000, we acquired the assets of Orban, a wholly-owned
subsidiary of Harman International Industries, Inc.  Including the $250,000
previously paid to Harman as non-refundable deposits in 1999, the total stated
purchase price was $10.5 million, of which $2 million was paid in cash and the
balance of which was paid by means of a combination of short-term and long-term
promissory notes that we issued to Harman.  As of September 30, 2001, our total
indebtedness to Harman was approximately $8.5 million. Effective October 1,
2001, this indebtedness was converted to demand notes payable on the demand of
Harman or, if no demand is sooner made, on the dates and in the amounts set
forth in the amended Credit Agreement that we entered into with Harman.  Our
substantial leverage may have important consequences for us, including the
following:

      * our ability to continue as a going concern will depend in part on
        whether Harman demands payment on the $8.5 million debt, or any portion
        thereof;
      * a significant portion of our cash flow from operations will be dedicated
        to servicing our debt obligations and will not be available for other
        business purposes;
      * the terms and conditions of our indebtedness limit our flexibility in
        planning for and reacting to changes in our business, and in making
        strategic acquisitions;
      * our ability to obtain additional financing in the future for working
        capital, capital expenditures, and other purposes may be substantially
        impaired; and
      * our substantial leverage may make us more vulnerable to economic
        downturns and competitive pressures.


      Our ability to meet our debt service obligations and reduce our total
indebtedness to Harman depends in part on our future operating performance. Our
future operating performance will depend on our ability to expand our business
operations by growing our core audio processing business, expanding our product
offerings and penetrating new and emerging markets, which we anticipate will
require additional financing.  In addition, our future operating performance
will depend on economic, competitive, regulatory and other factors affecting our
business that are beyond our control.  If we are unable to expand our business
operations as planned, we may not be able to service our outstanding
indebtedness to Harman.

THE EXISTENCE OF AN UNQUALIFIED OPINION CONTAINING A GOING CONCERN EMPHASIS
PARAGRAPH MAY MAKE IT MORE DIFFICULT FOR US TO OBTAIN CREDIT OR ADDITIONAL
CAPITAL AND MAY JEOPARDIZE OUR RELATIONSHIP WITH EXISTING AND NEW CUSTOMERS.

      Our inability to pay the $8.5 million debt to Harman should payment be
demanded, our difficulties in meeting our financing needs and our negative
working capital position created by the

                                       28
<PAGE>
demand notes have resulted in our independent public accountants adding a going
concern emphasis paragraph to their report by including a statement that such
factors raise substantial doubt about our ability to continue as a going
concern. The inclusion of a going concern emphasis paragraph generally makes it
more difficult to obtain trade credit, insurance or additional capital through
public or private debt or equity financings.  We may also find it more difficult
to maintain existing customer relationships and to initiate new customer
relationships.

WE WILL NEED ADDITIONAL DEBT OR EQUITY TO SERVICE THE DEBT PAYABLE AS A RESULT
OF OUR ACQUISITION OF ORBAN, AND WE MAY NOT BE ABLE TO OBTAIN THIS FINANCING ON
ACCEPTABLE TERMS.

      Upon our acquisition of the assets of Orban, we issued a $3.5 million
short-term note and a $5 million long-term note payable to Harman. Effective
October 1, 2001, both of these notes were converted to demand notes payable on
the demand of Harman or, if no demand is sooner made, on the dates and in the
amounts set forth in the amended Credit Agreement that we entered into with
Harman.  Our ability to service this debt will depend on our ability to obtain
either additional debt or equity financing, or a combination thereof. We cannot
be sure, however, that we will be able to obtain the necessary debt or equity
financing on acceptable terms.  Also, additional debt financing or the sale of
additional equity securities may cause the market price of our common stock to
decline.  If we are unable to obtain additional debt or equity financing on
acceptable terms, we may have to negotiate further restructuring of the debt
with Harman.  If Harman is unwilling to restructure the debt, we may default on
the debt and our ability to continue as a going concern would be jeopardized.

OUR ABILITY TO OBTAIN AN OUTSIDE LINE OF CREDIT IS SUBJECT TO THE APPROVAL OF
OUR CURRENT CREDITORS AND, IF SUCH APPROVAL IS WITHHELD, OUR ABILITY TO COMPETE
EFFECTIVELY IN OUR INDUSTRY COULD BE JEOPARDIZED.

      In connection with our acquisition of Orban, we entered into a Credit
Agreement with Harman.  Under the terms of the Credit Agreement, we are bound by
certain covenants that prevent us from obtaining additional credit facilities
without the prior written approval of Harman.  This limitation on our ability to
obtain additional outside lines of credit may curtail our ability to make
strategic acquisitions and to conduct research and development. This in turn
could jeopardize our competitive position within our industry.

FOREIGN CURRENCY FLUCTUATIONS COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

      On January 18, 2002, we acquired the assets of Dialog4 System Engineering
GmbH.  Our acquisition of this new product line has led to the establishment of
our new Orban Europe offices in Ludwigsburg, Germany. Transactions and expenses
of our Orban Europe operations will be conducted in Euros which will expose us
to market risks related to foreign currency exchange rate fluctuations that
could adversely affect our operating results.  For instance, a strengthening of
the U.S. dollar against the Euro could reduce the amount of cash and income we
receive and recognize from Orban Europe. Furthermore, it is likely that for
accounting purposes we will recognize foreign currency gains or losses arising
from our operations in Europe on weighted average rates of exchange in the
period incurred and translate assets and liabilities of these operations into
U.S. dollars based on year-end foreign currency exchange rates, both of which
are subject to currency fluctuations between the U.S. dollar and the Euro.  As
foreign exchange rates vary, our results from operations and profitability may
be adversely affected.

      In 2003, we expect to derive approximately 05% of our total revenues from
our Orban Europe operations.  This percentage may increase in future years as we
further develop and expand our operations in Europe.  We cannot predict the
effects of exchange rate fluctuations on our operating

                                       29
<PAGE>

results. We do not currently intend to engage in foreign currency exchange
hedging transactions to manage our foreign currency exposure.  If and when we do
engage in foreign currency exchange hedging transactions, we cannot assure you
that our strategies will adequately protect our operating results from the
effects of exchange rate fluctuations.

WE HAVE A LIMITED OPERATING HISTORY ON WHICH TO BASE AN EVALUATION OF OUR
COMBINED OPERATIONS WITH ORBAN AND OUR PROSPECTS FOR THE FUTURE.

      We commenced our combined operations with Orban on May 31, 2000.
Accordingly, we have a limited operating history on which an evaluation of our
combined operations with Orban can be based.  Our prospects must be considered
in light of the risks, expenses, difficulties and uncertainties frequently
encountered by companies in the early stages of integration, such as:

      * the difficulty of integrating the operations, technologies, personnel
        and cultures of our companies;
      * the potential disruption of the ongoing business of our companies;
      * the distraction of management of our companies from ongoing business
        concerns;
      * potential unknown liabilities associated with the merger of our
        companies; and
      * the potential disruption of our employee base.

      We cannot guarantee that any or all of the above risks, expenses,
difficulties and uncertainties will not occur as a result of our integration of
the Orban operations.  Nor can we guarantee that our integration with Orban will
be achieved successfully or as rapidly as we would like.

OUR FUTURE SUCCESS IS DEPENDENT ON OUR SUCCESSFUL INTEGRATION OF THE ORBAN
OPERATIONS INTO OUR OWN.

     We are in the process of integrating the operations of Orban with our
existing operations in order to achieve economies of scale, manufacturing and
marketing efficiencies, reduced operational expenses and cross-selling
opportunities.  Although the combination of our operations with those of Orban
has produced substantial synergies, nevertheless this combination is ongoing and
continues to present significant management challenges.  We cannot assure you
that this integration, and the synergies expected to result from that
integration, will be achieved to the extent initially anticipated. If management
is unable to completely and successfully integrate our operations with those of
Orban, we will not fully realize the benefits of integration noted above, and
our business, results of operations and financial condition could be adversely
affected.

WE SERVE A MARKET IN WHICH THERE ARE A LIMITED NUMBER OF CUSTOMERS AND OUR
FINANCIAL WELL-BEING IS DIRECTLY TIED TO THE FINANCIAL HEALTH OF THESE
CUSTOMERS.

      In recent years, the radio and television industry in the United States
has experienced a great deal of consolidation of ownership.  As a result,
several corporations each now own a substantial number of radio and television
stations.  These corporations are the largest purchasers of our audio processing
and post-production equipment.  Moreover, a significant amount of our revenue is
derived from audio processing replacement orders that come from these customers.
Our financial stability and well-being is thus directly tied to the financial
health of these customers.  If these customers experience financial difficulty,
regardless of the cause, they may delay, reduce or cancel orders for new audio
processing or post-production equipment.  If this occurs, our results of
operations could decline and we could experience difficulty in servicing our
debt obligations.

                                       30
<PAGE>
WE MUST ADAPT TO RAPID TECHNOLOGICAL CHANGE AND INCREASED COMPETITION IF WE ARE
GOING TO BE ABLE TO COMPETE EFFECTIVELY IN OUR INDUSTRY.

      While audio processing has been and will continue to be our core business,
we are using our existing technologies to enter the emerging markets of digital
audio broadcasting, cable television and Internet-related audio delivery. These
markets are characterized by rapid technological change and require a
significant commitment of capital and human resources.  We intend to engage
continually in research and development activities so that we can improve our
current products and develop new products. However, our significant debt
obligations may limit the amount of resources, both capital and human, that we
can commit to research and development.  This could jeopardize the success and
reception of our products in these emerging markets.  In addition, because of
the rapid pace of change and the intense competition that characterizes these
markets, our products may become unmarketable or obsolete by a competitor's more
rapid introduction to the marketplace.

WE MAY NOT BE ABLE TO RETAIN OUR EXISTING PERSONNEL OR HIRE AND RETAIN THE
ADDITIONAL PERSONNEL THAT WE NEED TO SUSTAIN AND GROW OUR BUSINESS.

      Our future success will depend on our ability to attract, retain and
motivate employees with the necessary skills and expertise required by our
business.  Competition for employees who possess the technical expertise to
develop and manufacture our products is intense.  A shortage in available
skilled labor could require us to increase our wages and benefits to attract and
retain enough employees.  An increase in our labor costs, or our inability to
attract, retain and motivate employees, would likely harm our growth plans and
may adversely affect our business and results of operations.

WE DEPEND ON A NUMBER OF VENDORS TO SUPPLY US WITH COMPONENT PARTS THAT ARE
NECESSARY TO THE PRODUCTION OF OUR AUDIO PROCESSING AND POST-PRODUCTION
EQUIPMENT.

      We rely on certain vendors to provide component parts for use in the
manufacturing of our audio processing and post-production equipment.  As
technology improves, some of these parts have become obsolete and vendors have
discontinued their production of such parts.  When this occurs, we must either
obtain these necessary parts from alternative sources, or design around these
parts so that we are able to continue producing our audio processing and
post-production equipment.  If any of the component parts that we require become
unavailable and we are not able to design around these parts, we may not be able
to offer some of our products and our sales revenues may decline.

OUR PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD EXERCISES
SIGNIFICANT CONTROL OVER US.

     Charles J. Brentlinger, our President, Chief Executive Officer and Chairman
of the Board, currently owns 822,035 shares of our common stock and holds
options to purchase approximately 1,365,005 additional shares.  Based on a total
of 3,806,846 shares of our common stock issued and outstanding as of March 31,
2003, if Mr. Brentlinger exercises all of his options he will own of record and
beneficially approximately 42.3% of our issued and outstanding shares.  This
means that Mr. Brentlinger exercises, and will continue to exercise, significant
control over the business and affairs of our company. Mr. Brentlinger's exercise
of this control may, in certain circumstances, deter or delay a merger, tender
offers, other possible takeover attempts or changes in our management which may
be favored by some or all of our minority shareholders.

                                       31
<PAGE>
WE DEPEND ON A FEW KEY MANAGEMENT PERSONS.

      We are substantially dependent on the personal efforts and abilities of
Charles Jayson Brentlinger, our Chairman, President and Chief Executive Officer,
and Robert Orban, our Vice President and Chief Engineer.  The loss of either of
these officers or our other key management persons could harm our business and
prospects for growth.  As a result, we have obtained key man life insurance
policies on the lives of each of these officers. We also have employment
agreements with each of these officers which are more fully described elsewhere
in this report.

THE LOCATION OF OUR ORBAN DIVISION SUBJECTS US TO A NUMBER OF RISKS THAT ARE
BEYOND OUR CONTROL WHICH COULD RESULT IN PRODUCTION INTERRUPTIONS.

      Our business depends on the efficient and uninterrupted production of our
audio processing equipment and other products.  Our Orban division is currently
located in San Leandro, California, and we expect to maintain our operations at
this facility for the foreseeable future.  While we have taken precautions
against production interruptions, interruptions could nevertheless result from
natural disasters such as earthquakes, fires or floods.  In addition, the power
shortages which occur in California from time to time have resulted in planned
and unplanned power outages and increased energy costs which we may not be able
to pass on to our customers. Power outages, which last beyond our backup and
alternative power arrangements, could harm our customers and our business.
Finally, our location in the Silicon Valley corridor of California subjects us
to increased operating costs and labor shortages which could adversely affect
our production capabilities and result in reduced revenues.

THE MARKET PRICE OF OUR COMMON STOCK HAS BEEN VOLATILE AND THE VALUE OF YOUR
INVESTMENT MAY DECLINE.

      The volatility of the market price of our common stock may cause wide
fluctuations in the price of our common stock on the OTC Bulletin Board. The
market price of our common stock is likely to be affected by:

      * changes in general conditions in the economy or the financial markets;
      * variations in our quarterly operating results;
      * changes in financial estimates by securities analysts;
      * other developments affecting us, our industry, customers or competitors;
      * the operating and stock price performance of companies that investors
        deem comparable to us; and
      * the number of shares available for resale in the public markets under
        applicable securities laws.

THE LIQUIDITY OF OUR COMMON STOCK COULD BE RESTRICTED BECAUSE OUR COMMON STOCK
FALLS WITHIN THE DEFINITION OF A PENNY STOCK.

      Under the rules and regulations of the Securities and Exchange Commission
(SEC), as long as the trading price of our common stock on the OTC Bulletin
Board is less than $5 per share, our common stock will come within the
definition of a "penny stock."  On March 31, 2003, the last sale price of our
common stock on the OTC Bulletin Board was $0.44 per share.  Generally speaking,
the definition of a "penny stock" does not include stock that is traded on
Nasdaq or on a national securities exchange.  Since our common stock is traded
on the OTC Bulletin Board, rather than on Nasdaq or a national securities
exchange, our common stock falls within the definition of a  "penny stock" while
it is trading below $5

                                       32
<PAGE>
per share.  As a result, the trading of our common stock is subject to certain
"penny stock" rules and regulations.

      The SEC rules and regulations require that broker-dealers, prior to
effecting any transaction in a penny stock, satisfy certain disclosure and
procedural requirements with respect to the prospective customer.  These
requirements include delivery to the customer of an SEC-prepared risk disclosure
schedule explaining the nature and risks of the penny stock market, disclosure
to the customer of the commissions payable to both the broker-dealer and any
other salesperson in connection with the transaction, and disclosure to the
customer of the current quotations for the stock to be purchased.  In addition,
if the broker-dealer is the sole market maker, it must disclose this fact and
the broker-dealer's presumed control over the market.  Finally, prior to
effecting any penny stock transaction, broker-dealers must make individualized
written suitability determinations and obtain a written agreement from customers
verifying the terms of the transaction.  Subsequent to any sale of penny stock,
broker-dealers must send monthly statements disclosing recent price information
for the penny stock held in the customer's account and certain other information
relating to the limited market in penny stocks. These rules, regulations and
procedural requirements may restrict the ability of broker-dealers to sell our
common stock or discourage them from doing so. As a result, pu

BECAUSE OUR SUCCESS DEPENDS IN PART ON OUR ABILITY TO PROTECT OUR INTELLECTUAL
PROPERTY, INFRINGEMENT ON OUR PROPRIETARY RIGHTS COULD LEAD TO COSTLY LITIGATION
AND DECREASED REVENUES.

      Our copyrights, patents, trademarks, trade secrets and similar
intellectual property are critical to our success.  To establish and protect our
proprietary rights, we rely on a combination of copyright, trademark, patent and
trade secret laws, confidentiality and non-disclosure agreements and contractual
provisions with employees and third parties, and license agreements with
consultants, vendors and customers.  Despite such protections, there can be no
assurance that these steps will be adequate, that we will be able to secure
trademark registrations for all of our marks in the United States or other
countries or that third parties will not infringe upon or misappropriate our
copyrights, patents, trademarks and similar proprietary rights.  In addition,
effective copyright, patent and trademark protection may be unenforceable or
limited in certain countries. In the future, litigation may be necessary to
enforce and protect our trade secrets, copyrights, patents and other
intellectual property rights.  We may also be subject to litigation to defend
against claims of infringement of the rights of others or to determine the scope
and validity of the intellectual property rights of others.  Any such litigation
could cause us to incur substantial expenses and would adversely affect our
financial condition.

                                       33
<PAGE>
ITEM 7.  FINANCIAL STATEMENTS

                                      INDEX

                                                                          Page
                                                                          ----

Independent Auditors' Report .............................................. 35

Consolidated Balance Sheets - December 31, 2002 and 2001 .................. 36

Consolidated Statements of Operations -
    For the Years Ended December 31, 2002 and 2001 ........................ 38

Consolidated  Statements of Stockholders' Equity (Deficit) -
    For the Years Ended December 31, 2002 and 2001 ........................ 39

Consolidated  Statements of Cash Flows -
    For the Years Ended December 31, 2002 and 2001 ........................ 40

Notes to Financial Statements ............................................. 42

                                       34
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
Circuit Research Labs, Inc.

We have audited the accompanying consolidated balance sheet of Circuit Research
Labs, Inc. and Subsidiaries as of December 31, 2001 and the related consolidated
statement of operations, stockholders' equity (deficit) and cash flows for the
year then ended.  These consolidated financial statements are the responsibility
of the Company's management.  Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.  The consolidated
financial statements of Circuit Research Labs, Inc. and Subsidiaries as of
December 31, 2000 were audited by other auditors whose report dated April 16,
2001, (May 17, 2001 as to note 4 and 10, and October 1, 2001 as to note 11),
which expressed an unqualified opinion on those consolidated financial
statements with emphasis of matter paragraphs covering a restatement and
substantial doubt regarding the Company's ability to continue as a going
concern.

We conducted our audit in accordance with U.S. generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements.  An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation.  We believe that our audit
provides a reasonable basis for our opinion.

In our opinion, the 2001 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Circuit
Research Labs, Inc. and Subsidiaries as of December 31, 2001 and the results of
their operations and their cash flows for the year then ended in conformity with
U.S. generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern.  As described in Note 11, the
Company's deteriorating financial results and liquidity have caused it to
renegotiate certain loan agreements.  These events and circumstances raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 11.
The accompanying consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of these uncertainties.

Altschuler, Melvoin and Glasser LLP
Los Angeles, California
March 29, 2002

                                       35
<PAGE>
                  CIRCUIT RESEARCH LABS, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2002 and 2001

ASSETS
                                                        2002            2001
CURRENT ASSETS:                                     -----------     -----------
   Cash                                               $214,401        $280,895
   Accounts receivable, trade, net of allowance for
     doubtful accounts of $108,361 in 2002 and
     $98,663 in 2001                                   645,655         641,156
   Inventories                                       2,305,194       2,828,198
   Other current assets                                105,161          93,861
                                                    -----------     -----------
     Total current assets                            3,270,411       3,844,110
                                                    -----------     -----------

PROPERTY, PLANT AND EQUIPMENT - Net                    750,206       1,413,607

OTHER ASSETS:
   Goodwill, net of amortization of $1,672,907 in
     2002 and $1,672,907 in 2001                     7,476,008       5,734,180
   Deferred acquisition costs                                           34,563
   Other                                               287,582          41,399
                                                   -----------     -----------
                                                     7,727,878       5,810,142

TOTAL                                              $11,784,207     $11,067,859
                                                   ===========     ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable                                 $1,196,967      $1,011,955
   Notes payable                                     8,520,150       8,583,588
   Current portion of long-term debt                 1,053,254         227,196
   Accrued salaries and benefits                       373,603         262,430
   Accrued professional fees                                            48,672
   Customer deposits                                   255,281          50,271
   Other accrued expenses and liabilities              565,014         281,011
                                                   -----------     -----------
    Total current liabilities                       11,964,269      10,465,123
                                                   -----------     -----------

LONG-TERM DEBT, LESS CURRENT PORTION                   461,242         485,410
                                                   -----------     -----------
    Total liabilities                               12,425,511      10,950,533
                                                   -----------     -----------

                                       36
<PAGE>
CONSOLIDATED BALANCE SHEETS
December 31, 2002 and 2001 - continued
                                                        2002            2001
                                                   -----------     -----------
STOCKHOLDERS' EQUITY (DEFICIT)
   Preferred stock, $100 par value - authorized,
     500,000 shares, None issued
   Common stock, $.10 par value - authorized,
     20,000,000 shares, 3,767,404 and 2,388,880
     shares issued and outstanding at December
     31, 2002 and 2001                                 376,741         238,888
   Additional paid-in capital                        5,434,785       4,196,229
   Accumulated deficit                              (6,452,830)     (4,317,791)
                                                   -----------     -----------
     Total stockholders' equity (deficit)             (641,304)        117,326
                                                   -----------     -----------
TOTAL                                              $11,784,207     $11,067,859
                                                   ===========     ===========

See Notes to Consolidated Financial Statements.

                                       37
<PAGE>
                  CIRCUIT RESEARCH LABS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 For the Years Ended December 31, 2002 and 2001

                                                        2002            2001
                                                   -----------     -----------
NET SALES                                          $10,772,593     $13,066,365
COST OF GOODS SOLD                                   5,906,507       6,589,519
                                                   -----------     -----------
Gross profit                                         4,866,086       6,476,846
                                                   -----------     -----------
OPERATING EXPENSES
   Selling, general and administrative               4,511,972       4,690,331
   Research and development                          1,440,686       1,408,208
   Depreciation                                        344,262         329,752
   Amortization                                                      1,056,999
                                                   -----------     -----------
Total operating expenses                             6,296,920       7,485,290
                                                   -----------     -----------
LOSS FROM OPERATIONS                                (1,430,834)     (1,008,444)
                                                   -----------     -----------
OTHER (INCOME) EXPENSE:
   Sundry income                                      (455,649)        (32,221)
   Interest expense                                  1,159,854       1,070,417
                                                   -----------     -----------
Total other expense                                    704,205       1,038,196
                                                   -----------     -----------
LOSS BEFORE INCOME TAXES                            (2,135,039)     (2,046,640)

INCOME TAXES                                                 0               0
                                                   -----------     -----------
NET LOSS                                           ($2,135,039)    ($2,046,640)
                                                   ===========     ===========

NET LOSS PER COMMON SHARE - BASIC AND DILUTED           ($0.58)         ($0.88)
                                                   ===========     ===========

See Notes to Consolidated Financial Statements.

                                       38
<PAGE>
                  CIRCUIT RESEARCH LABS, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                 For the Years Ended December 31, 2002 and 2001
<TABLE>
<CAPTION>
                                       Common
                               ---------------------
                                                        Additional
                                                         Paid-in     Accumulated
                                Shares       Amount      Capital       Deficit       Total
                               ---------    ---------   ----------   ------------   ----------
<S>                            <C>          <C>         <C>          <C>            <C>
Balance, January 1, 2001       2,269,522      226,952    4,077,538    (2,271,151)   2,033,339

Issuance of common shares        119,358       11,936      118,691                    130,627

Net loss                                                              (2,046,640)  (2,046,640)
                               ---------    ---------   ----------   ------------   ----------
Balance, December 31, 2001     2,388,879      238,888    4,196,229    (4,317,791)     117,326
                               ---------    ---------   ----------   ------------   ----------

Issuance of common shares      1,378,524      137,853    1,238,556                  1,376,409

Net loss                                                              (2,135,039)  (2,135,039)
                               ---------    ---------   ----------   ------------   ----------
Balance, December 31, 2002     3,767,404     $376,741   $5,434,785   ($6,452,837)   ($641,304)
                               =========    =========   ==========   ============   ==========
</TABLE>

See Notes to Consolidated Financial Statements.

                                       39
<PAGE>
                  CIRCUIT RESEARCH LABS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 For the Years Ended December 31, 2002 and 2001

                                                        2002            2001
                                                   -----------     -----------
OPERATING ACTIVITIES:
  Net Loss                                         ($2,135,039)    ($2,046,640)
  Adjustments to reconcile net loss to net
    cash provided by operating activities
  Depreciation and amortization                        430,940       1,477,258
  Provision for uncollectible accounts                   9,698          83,708
  Provision for inventories reserve                    168,018         532,815
  Stock compensation                                   108,409
  Gain on sale of building                            (351,757)

Changes in assets and liabilities:
  Accounts receivable                                  (14,197)          2,137
  Inventories                                        1,064,233         (40,840)
  Prepaid expenses and other assets                    (23,822)         89,529
  Accounts payable, accrued expenses and deposits      764,078          55,439
                                                   -----------     -----------
    Net cash provided by operating activities           20,561         153,406
                                                   -----------     -----------
INVESTING ACTIVITIES:
  Purchase of assets of Avocet Instruments, Inc.                        (8,350)
  Proceeds received from sale of building              679,499
  Capital expenditures                                 (30,516)        (15,866)
  Deferred acquisition costs                                           (34,563)
                                                   -----------     -----------
    Net cash provided by (used in)
      investing activities                             648,983         (58,779)
                                                   -----------     -----------
FINANCING ACTIVITIES:
  Principal payments on notes payable                  (90,991)         (6,488)
  Principal payments on long-term debt                (663,047)        (79,447)
  Proceeds from issuance of common stock                18,000
                                                   -----------     -----------
    Net cash used in financing activities             (736,038)        (85,935)
                                                   -----------     -----------
NET (DECREASE) INCREASE IN CASH                        (66,494)           8,692

CASH AT BEGINNING OF PERIOD                            280,895          272,203
                                                   -----------     -----------
CASH AT END OF PERIOD                                 $214,401         $280,895
                                                   ===========     ============

                                       40
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2002 and 2001 - continued

                                                        2002            2001
                                                   -----------     -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Cash paid during the year for:
    Interest                                          $835,081      $1,041,084
                                                   ===========     ===========

    Income Taxes                                            $0              $0
                                                   ===========     ===========


NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES:
  Acquisitions:
    Fair value of net assets acquired,
      including goodwill                            $2,034,563         $86,330
    Debt issued to seller                             (750,000)        (77,980)
    Common Stock issued to seller                   (1,250,000)
                                                   -----------     -----------
    Cash paid                                         $(34,563)         $8,350
                                                   ===========     ===========

Conversion of stockholder loan to equity                    $0         $97,500
                                                   ===========     ===========
Common stock issued for consulting
  services rendered                                   $100,000              $0
                                                   ===========     ===========

Common stock issued for compensation                    $8,409              $0
                                                   ===========     ===========
Solectron inventory purchase financed with
  long term debt                                      $714,938              $0
                                                   ===========     ===========

Conversion of stockholder advance to equity                 $0         $33,127
                                                   ===========     ===========
Conversion of accounts payable to notes
  payable and long-term debt                           $27,553        $179,903
                                                   ===========     ===========

See Notes to Consolidated Financial Statements.

                                       41
<PAGE>
                  CIRCUIT RESEARCH LABS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

1.   DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Circuit Research Labs, Inc. (the "Company" or "CRL") is an electronics company
developing, manufacturing and marketing high quality audio processing and
transmission encoding equipment for the radio, television and professional audio
markets worldwide.

Principles of Consolidation - The consolidated financial statements include the
accounts of Circuit Research Labs, Inc. and its wholly owned subsidiaries:  CRL
Systems, Inc. ("CRL Systems") and CRL International, Inc. (collectively, the
"Company").   Significant intercompany accounts and transactions have been
eliminated in consolidation.

On May 31, 2000, CRL Systems acquired the net assets of Harman Acquisition Corp.
formerly known as Orban, Inc. ("Orban"), a wholly owned subsidiary of Harman
International Industries, Inc. ("Harman").  Including the $500,000
non-refundable deposit previously paid to Harman, the total stated purchase
price was $10.5 million, $2 million of which was paid in cash, the balance was
financed through a combination of short-term and long-term seller financing.  In
addition to the stated purchase price, CRL issued to Harman warrants to purchase
1,000,000 shares of its common stock, immediately exercisable for $2.25 per
share.  The warrants were valued at $1,050,000 at the time of the purchase to be
part of the total purchase price of $11,550,000.    As part of the acquisition,
CRL Systems purchased the rights to the name "Orban" and operates a portion of
its business under the "Orban" trade name.

The acquisition has been accounted for as a purchase and, accordingly, the net
assets and results of operations of Orban have been included in the consolidated
financial statements commencing May 31, 2000.  The excess of the total
acquisition costs over the fair value of the assets acquired of approximately
$7.1 million was being amortized over 7 years until January of 2002 when the
Company adopted FAS 142.

On May 31, 2001, CRL acquired the assets of Avocet Instruments, Inc. for $82,980
plus other costs of $3,350.  The acquisition has been accounted for as an asset
purchase.  The excess of the total acquisition costs over the fair value of the
assets acquired was $16,195 was being amortized over 7 years until January of
2002 when the Company adopted FAS 142.

On January 18, 2002 we purchased the assets of Dialog4 pursuant to an Asset Sale
and Purchase Agreement for $2 million, comprised of 1,250,000 shares of
restricted common stock, valued at $1.00 per share, and $750,000 cash to be paid
at a later date either by us from our working capital or by our President and
Chief Executive Officer, Charles Jayson Brentlinger.  The acquisition has been
accounted for as a purchase and, accordingly, the net assets and results of
operations of Dialog4 have been included in the consolidated financial
statements commencing January 18, 2002.  The excess of the total acquisition
costs over the fair value of the assets acquired was approximately $1.7 million.

                                       42
<PAGE>
The following unaudited pro forma summary combines the consolidated results of
operations of the Company and Dialog4 as if the acquisition had occurred on
January 1, 2001 after giving effect to certain adjustments including
amortization of the purchase price in excess of net assets acquired, corporate
general and administrative expenses, and income taxes.  Proforma information for
2002 would not be significantly different from the historical information for
2002 because the operations for Dialog4 for the period through January 18, 2002
where not significant. This pro forma summary is not necessarily indicative of
the results of operations that would have occurred if the Company and Dialog4
had been combined during such period.  Moreover, the pro forma summary is not
intended to be indicative of the results of operations to be attained in the
future.
                                   2001
                                -----------
Net revenue                     $13,066,000
Net loss                         (2,210,000)
Net loss per common share              (.62)


Significant accounting policies are as follows:

a.    Inventories are stated at the lower of cost (first-in, first-out method)
      or market.

b.    Property, plant and equipment are stated at cost.  Depreciation is
      computed using the straight-line method over the estimated useful lives of
      the related assets ranging from 3 to 5 years for furniture, fixtures,
      machinery and equipment, and 31.5 years for building and improvements.

c.    Goodwill. In July 2001, the Financial Accounting Standards Board (FASB)
      issued SFAS Nos. 141 and 142 ("SFAS 141" and "SFAS 142"), "Business
      Combinations" and "Goodwill and Other Intangible Assets."  SFAS 141
      replaces APB Opinion No. 16 and eliminates pooling-of-interests accounting
      prospectively.  It also provides guidance on purchase accounting related
      to the recognition of intangible assets and accounting for negative
      goodwill. SFAS 142 changes the accounting for goodwill from an
      amortization method to an impairment-only approach.  Under SFAS 142,
      goodwill will be tested at least annually and whenever events or
      circumstances occur indicating that goodwill might be impaired.  SFAS 141
      and SFAS 142 are effective for all business combinations initiated after
      June 30, 2001.

      The company has adopted FASB 142, and accordingly amortization of goodwill
      recorded for business combinations consummated prior to July 1, 2001 has
      ceased.  Companies are required to adopt SFAS 142 for fiscal years
      beginning after December 15, 2001.  The Company adopted SFAS 142 on
      January 1, 2002.  SFAS 142 requires that goodwill be tested for
      impairment, at least annually, and shall not be amortized.  The goodwill
      impairment test is a two-step process.  The first step compares the fair
      value of a reporting unit with its carrying amount.  If the fair value
      exceeds the carrying amount, goodwill of the reporting unit is considered
      not impaired and no further testing is necessary.  If the fair value is
      less than the carrying value, the second step must be performed to
      determine the amount of the impairment.  The second step compares the
      implied fair value of the reporting unit goodwill with the carrying amount
      of that goodwill.  If the carrying amount of the reporting unit goodwill
      exceeds the implied fair value of that goodwill, an impairment loss is
      recognized in an amount equal to that excess.  Any loss resulting from the
      transitional impairment test is reflected as a change in accounting
      principle.

      The Company has determined the estimated fair value of the Orban reporting
      unit with a view to determining whether the goodwill has been impaired
      under these new rules. Management has concluded that the estimated fair
      value of the Orban reporting unit is in excess of its carrying value as of
      January 1, 2002.  The fair value has been estimated based on the customer
      base, cash flows and existing product line of the Orban reporting unit. In
      addition, the Company continued the annual goodwill impairment test for
      the year ended December 31, 2002. As a result of this review the Company
      has established that no impairment loss is required to be recorded upon
      the adoption of SFAS 142, nor for the year ended December 31, 2002.

      At the time that an acquisition is made, the Company records each asset
      acquired and each liability assumed at its estimated fair value, which
      estimate is subject to future adjustment when appraisals or other
      valuation data are obtained.  The excess of (i) the total consideration
      paid for the acquired assets over (ii) the fair value of the assets
      acquired, fewer liabilities assumed, is recorded as goodwill.  As of
      December31, 2002, the Company has no identifiable intangible assets with
      definite lives.

                                       43
<PAGE>

      At December 31, 2001 and December 31, 2002, the Company reported
      $5,734,180 and $7,476,008, respectively, of net goodwill on its
      consolidated balance sheets.  At both dates, both amounts included
      $5,719,142 for the acquisition of the assets of Orban, Inc. and $15,038
      for the acquisition of the assets of Avocet Instruments, Inc.  In
      addition, the December 31, 2002 balance includes $1,741,828 for the
      acquisition of the assets of Dialog4 System Engineering GmbH.  The
      following table presents the impact of goodwill amortization on net income
      (loss) and net income (loss) per share for year ended December 31, 2001:

For the Year Ended December 31, 2001     Net Loss      Basic EPS  Diluted EPS
------------------------------------   ------------    ---------  -----------
Reported Net Loss                      ($2,046,640)      ($0.88)     ($0.88)
Add back: Goodwill amortization          1,056,999        $0.45       $0.45
Adjusted                                  (989,641)      ($0.43)     ($0.43)

d.    Deferred acquisition costs as of December 31, 2001 are related to the 2002
      asset purchase of Dialog4.

e.    Long-lived assets - The Company reviews the carrying value of its
      long-lived assets and identifiable intangibles for possible impairment
      whenever events or changes in circumstances indicate that the carrying
      amounts may not be recoverable.  For assets to be disposed of, the Company
      reports long-lived assets and certain identifiable intangibles at the
      lower of carrying amount or fair value less cost to sell. No impairment
      losses was recorded for the years ended December 31, 2002 and 2001.

f.    Revenue - In accordance with SFAS 48, "Revenue Recognition When Right of
      Return Exists," revenue is recognized on sales of products when title
      transfers to customers, which is generally at the time of shipment.  The
      Company sells its products primarily through a network of wholesale
      distributors and dealers. The Company's primary payment terms with its
      dealers and distributors are 5% prepayment net 30 after date of shipment
      for domestic and 5% prepayment net 30 after date of shipment for
      international.

      Sales transactions with distributors occur at prices fixed at the sale
      date without contingencies related to (i) the buyer's resale of the
      product, (ii) the theft or damage of the product or (iii) future Company
      performance obligations to effect the resale of the product.  Purchasers
      have economic substance separate from the Company and expected sales
      returns can be reasonably
      estimated.  Because the Company does not sell on consignment or guarantee
      the resale of its products by its dealer or distributor network, the
      Company records revenue at the time of shipment in accordance with SFAS
      48.

      The Company grants trade credit to its customers. Receivables are valued
      at management's estimate of the amount that will ultimately be collected.
      The allowance for doubtful accounts is based on specific identification of
      uncollectible accounts and the Company's historical collection experience.

g.    Research and development costs totaling $1,440,686 and $1,408,208 for the
      years ended December 31, 2002 and 2001, respectively, are charged to
      expense as incurred.

                                       44
<PAGE>
h.    Income taxes - Income tax expense is calculated under the liability method
      as required under SFAS No. 109, "Accounting for Income Taxes."  Under the
      liability method, deferred tax assets and liabilities are determined based
      upon the differences between financial statement carrying amounts and the
      tax bases of existing assets and liabilities, and are measured at the tax
      rates that will be in effect when these differences reverse.  The benefit
      of the Company's operating loss carryforwards has been reduced 100% by a
      valuation allowance at December 31, 2002 and 2001.

i.    Financial instruments - SFAS No. 107 "Disclosures About Fair Value of
      Financial Instruments" requires disclosures of the estimated fair value of
      certain financial instruments.  The Company has estimated the fair value
      of its financial instruments using available market data.  However,
      considerable judgment is required in interpreting market data to develop
      estimates of fair value. The use of different market assumptions or
      methodologies may have a material effect on the estimates of fair value.
      The carrying values of cash, receivables, accounts payable and long-term
      debt approximate fair values due to the short-term maturities or market
      rates of interest of these instruments.

j.    Net loss per share - In calculating net loss per share for the year ended
      December 31, 2002, the effects of 1,565,005 shares relating to options to
      purchase common stock and 1,395,690 shares relating to warrants were not
      used for computing diluted net loss per share because the result would be
      anti-dilutive.  For the year ended December 31, 2001, the options and
      warrants to purchase 1,000,000 and 1,708,158 shares respectively, of
      common stock were not used in computing diluted net loss per share because
      the result would be anti-dilutive.  SFAS No. 128, "Earnings per Share"
      establishes standards for computing and presenting net loss per share. It
      also requires the dual presentation of basic and diluted net loss per
      share on the face of the statement of operations.  Net loss per share is
      calculated as follows:

                                       45
<PAGE>
                                                   Year Ended
                                                   December 31,
                                           ---------------------------
                                               2002           2001
                                           ------------   ------------
      Numerator
        Net loss                           ($2,135,039)   ($2,046,640)

      Denominator
        Weighted average shares              3,658,084      2,326,848

      Basic and diluted net loss per share      ($0.58)        ($0.88)


k.    New accounting pronouncements

      In August 2001, the FASB issued Statement of Financial Accounting
      Standards No. 143 ("SFAS 143"), "Accounting for Obligations Associated
      with the Retirement of Long-Lived Assets."  SFAS 143 establishes
      accounting standards for the recognition and measurement of an asset
      retirement obligation and its associated asset cost.  It also provides
      accounting guidance for legal obligations associated with the retirement
      of tangible long-lived assets.  SFAS 143 is effective in fiscal years
      beginning after June 15, 2002, with early adoption permitted.  The Company
      plans to adopt SFAS 143 effective January 1, 2003.  The Company has not
      determined the effect of adopting SFAS 143 on its consolidated results of
      operations or financial position.

      In April 2002, the FASB approved SFAS No. 145, "Rescission of FASB
      Statements No. 4, 44 and 64, amendment of SFAS No. 13 and Technical
      Corrections".  SFAS No. 145 rescinds previous accounting guidance, which
      required all gains and losses from extinguishment of debt to be classified
      as an extraordinary item.  Under SFAS No. 145, classification of the debt
      extinguishment depends on the facts and circumstances of the transaction.
      SFAS No. 145 is effective for fiscal years beginning after May 15, 2002.

      In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
      Associated with Exit or Disposal Activities."  SFAS No. 146 requires
      recognition of costs associated with exit or disposal activities when they
      are incurred rather than at the date of a commitment to an exit or
      disposal plan.  Examples of costs covered by the standard include lease
      termination costs and certain employee severance costs that are associated
      with a restructuring, discontinued operation, plant closing, or other exit
      or disposal activity.  SFAS No. 146 is to be applied prospectively to exit
      or disposal activities initiated after December 31, 2002.

      In October 2002 the FASB issued SFAS 147, "Acquisition of Certain
      Financial Institutions". SFAS 147 addresses financial accounting and
      reporting for the acquisition of all or part of a financial institution.
      Since SFAS 147 is not relevant to the Company's business this statement
      will have no impact on the Company's financial position or results of
      operations.
                                       46
<PAGE>
      In December 2002 the FASB issued SFAS 148 "Accounting for Stock Based
      Compensation". This SFAS amends SFAS 123 and provides new guidance
      regarding the transition should an entity change from the intrinsic value
      method to the fair value method of accounting for employee stock based
      compensation cost. Additional information is now required to be disclosed
      regarding such cost in the financial statements of public companies.  SFAS
      148 will not have a material impact on the Company's financial statements.



                                       47
<PAGE>
l.    Use of estimates - The preparation of consolidated financial statements in
      conformity with generally accepted accounting principles necessarily
      requires management to make estimates and assumptions that affect the
      reported amounts of assets and liabilities and disclosure of contingent
      assets and liabilities at the date of the consolidated financial
      statements and the reported amounts of revenues and expenses during the
      reported period.  Actual results could differ from these estimates.

m.    Reclassifications - Certain reclassifications have been made to the 2001
      consolidated financial statements to conform to the classifications used
      in 2002 and have no effect on previously reported net loss.

                                       48
<PAGE>

2.   INVENTORIES

     Inventories consist of the following at December 31:

                                                        2002            2001
                                                    ----------      ----------
     Raw materials and supplies                     $2,388,922      $2,176,797
     Work in process                                   993,160       1,286,942
     Finished goods                                    464,506         737,835
                                                    ----------      ----------
     Total                                           3,846,588       4,201,574
     Less obsolescence reserve                       1,541,394       1,373,376
                                                    ----------      ----------
     Inventories, net                               $2,305,194      $2,828,198
                                                    ==========      ==========


3.   PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment consist of the following at December 31:

                                                        2002            2001
                                                    ----------      ----------
     Land                                                   $0        $130,869
     Building and improvements                         382,059         879,660
     Furniture and fixtures                             95,755          90,393
     Computer equipment                                898,149         847,737
     Machinery and equipment                         1,122,280       1,141,896
                                                    ----------      ----------
                                                     2,498,243       3,090,555
     Less accumulated depreciation and amortization  1,748,037       1,676,948
                                                    ----------      ----------
     Property, plant and equipment - net              $750,206      $1,413,607
                                                    ==========      ==========

Provision for depreciation and amortization charged to operations for the years
ended December 31, 2002 and 2001 amounted to $430,940 and $420,259,
respectively.


4.   LONG-TERM DEBT & NOTES PAYABLE

Long-term debt consists of the following at December 31:

                                                        2002            2001
                                                    ----------      ----------
     Notes to stockholder                             $178,905        $178,905
     Avocet Instruments, Inc.                           44,207          55,104
     Dialog4 Engineering GmbH                          597,055               0
     Solectron GmbH                                    649,371               0
     Mortgage notes                                          0         349,082
     Vendor note                                        32,019          86,629
     Employee note                                      12,940          42,886
                                                    ----------      ----------
     Total long-term debt                            1,514,497         712,606
     Less current portion                            1,053,254         227,196
                                                    ----------      ----------
     Total long-term debt, less current portion       $461,242        $485,410
                                                    ==========      ==========

                                       49
<PAGE>
On May 31, 2000, CRL Systems, Inc. and Harman Acquisition Corp. (formerly known
as Orban, Inc.) entered into a Credit Agreement to establish the terms and
conditions of the $8,500,000 loan from Harman to CRL Systems.  The agreement was
executed in conjunction with the Asset Sale Agreement between Harman and CRL
Systems, Inc.  The loan is evidenced by two promissory notes, the Senior
Subordinated Tranche A Note (the "Tranche A Note") and the Senior Subordinated
Tranche B Note (the "Tranche B Note").  The Tranche A Note, in the amount of
$5,000,000, originally bore interest at 8 percent per annum and required
quarterly principal payments beginning March 31, 2001, with a balloon payment of
$3,000,000 due on March 31, 2003.  The Tranche B Note, in the amount of
$3,500,000, originally bore interest at 8 percent per annum for the period from
June 1, 2000 to July 31, 2000 and 10 percent per annum from August 1, 2000 up to
its September 30, 2000 maturity date.  The notes are collateralized by, among
other things, all receivables, inventory and equipment, investment property,
including CRL's capital stock in CRL Systems, and intellectual property of CRL
and CRL Systems, as defined in the Guarantee and Collateral Agreement.  In
addition, all proceeds of debt or equity or sales of assets are to be first
applied to the remaining balance due on the notes, with the exception of
proceeds from the sale of stock to the Company's President and Chief Executive
Officer, Charles Jayson Brentlinger, pursuant to a Stock Purchase Agreement
between the Company and Mr. Brentlinger which was entered into prior to the date
of the Orban acquisition.

The Company received several payment extensions on the Tranche A and B notes.
First, in exchange for $150,000 cash and an increase in the interest rates to 12
percent per annum for both the Tranche A and Tranche B notes, Harman extended
the maturity date of the Tranche B note to November 30, 2000.  The maturity date
of the Tranche B note was subsequently extended several additional times without
fees or other significant changes to the original terms of the note and was due
in full on April 30, 2002.  Also, the first principal payment on the Tranche A
note of $250,000, originally due March 31, 2001, was extended to September 30,
2001 with the remaining quarterly principal payments deferred until April 30,
2002.  Interest only payments are payable monthly for both notes.  The Asset
Sale Agreement between CRL Systems and Harman contained a provision allowing
Harman to rescind the transaction if, as of November 30, 2000, CRL Systems had
not paid in full the $3.5 million short-term note.  If Harman had exercised its
option to rescind the agreement, it would have been required to return
$9,250,000 of the purchase price to CRL Systems, with the difference due to
Harman as liquidating damages.  Harman's option to rescind the agreement has
since expired.

On October 1, 2001, the Company and Harman entered into an Amendment to the
Credit Agreement (the "Amended Credit Agreement") under which both the
short-term and the long-term promissory notes were amended and restated.  Under
the Amended Credit Agreement, both promissory notes were converted to demand
notes payable upon the demand of Harman.  Interest is paid monthly at 12 percent
per annum.  Additionally, under the Amended Credit Agreement, the first
principal payment on the Tranche A Note of $250,000, the due date of which had
been extended to September 30, 2001, was increased to $1,250,000 and the
maturity date was extended to April 30, 2002.

On May 1, 2002, the Company entered into a Second Amendment to Credit Agreement
with Harman under which the long- and short-term demand notes were amended and
restated to remove the requirement for quarterly payments on the long-term note
and to extend the maturity dates for the notes to December 31, 2003, unless
Harman demands payment at an earlier date.  Interest only payments remain
payable monthly at 12 percent per annum for both notes and are also due on
demand.

On August 19, 2002 the Company executed a Letter of Agreement to extend the
interest payments due July 15, 2002, August 1, 2002 and August 15, 2002 each in
the amount of $42,410, for a total of $127,230 to be payable to Harman on or
before November 15th, 2002.

                                       50
<PAGE>
In November, 2002 the Company and Harman verbally agreed and was later
formalized to further extend the interest payments due July 15, 2002, August 1,
2002 and August 15, 2002 each in the amount of $42,410 and added the interest
payments due September 15, 2002 along with the semi monthly payments due in
October, November, each in the amount of $42,410 for a total that amounts to
$339,280 to be payable to Harman on or before December 6, 2002. The formalized
agreement amended the verbal agreement to require the Company to pay $100,000 of
interest in arrears on or before December 20, 2002 and to continue to make
timely payments.

As of December 31, 2002 we are in arrears by fewer than eight interest
installments in an aggregate amount of $324,190. As of part of the Debt
Restructure announced on March 27, 2003 Harman has agreed to add this unpaid
interest to the total principal due (after receipt of the $1 million in
principal and conversion of the $3.5 million of debt to equity stated in the
recent debt restricting agreement between Harman and the Company).

In consideration for arranging the purchase financing of Orban, the Company
incurred fees of $97,500 to a stockholder, the total of which was included in
the current portion of long-term debt at December 31, 2000.  The note was due on
August 14, 2001 after being extended from its prior due date of May 14, 2001 and
accrued interest of 7.5 percent per annum.  On August 10, 2001, the note was
converted to equity at the market price of $1.05 per share.

In connection with the acquisition of the assets of Orban, the Company issued
$205,000 in long-term debt to a stockholder in consideration for his role in
such acquisition.  The note bears interest at 7.5 percent per annum, with
principal and interest due monthly beginning August 1, 2000 for four years.
Based on a verbal agreement with the note holder, the Company made payments in
2001 sufficient for interest and some principal.   On November 12, 2001, the
Company and the stockholder agreed to defer the payments to January 2002 with
interest accruing at the rate of 7.5% per annum. As of December 31, 2002, the
Company has made partial payments on the accrued interest, and the outstanding
principal, balance of this debt was $178,905, plus over due interest of $4,488.

On May 30, 2000, the Company mortgaged its office building and manufacturing
facility in Tempe, Arizona for $335,000 in order to raise part of the purchase
price payable in connection with its acquisition of Orban.  The mortgage note
bore interest at 15.25 percent per annum, payable monthly.  The full principal
balance of the mortgage note was originally due November 30, 2000, but the
maturity date was extended to December 31, 2000.  Prior to that date, the
Company refinanced the unpaid balance and entered into two new mortgage
agreements for $300,000 and $62,000, respectively.  The notes bear interest at
11.75 percent per annum and 14.75 percent per annum, respectively.  Principal
and interest payments are payable monthly for both notes commencing in February
2001, using a 12-year amortization period and requiring a balloon payment in
February 2006.

Subsequently, on December 10, 2002 the Company sold its building in Tempe, for
$679,499.  The proceeds were used to pay off the remaining principal mortgage
balance of $333,251 plus commission and fees and some short term debt.

On June 12, 2000, we borrowed $68,387 from an employee to assist us in the
purchase of the assets of Orban.  The unsecured promissory note evidencing the
debt bears interest at 12 percent per annum.  The note was originally due
September 12, 2000 but was extended to September 30, 2001 without payment of a
fee.  In order to further extend the note, we agreed to make 12 monthly
installment payments of principal and interest over a one-year period commencing
September 1, 2001.  We did not pay a fee in connection with this extension.  As
part of the agreement, the note continues to bear interest at 12 percent per
annum, but is compounded monthly.  As of December 31, 2002, we had paid a total
of $55,447 on the note and the remaining unpaid balance was $12,940.

                                       51
<PAGE>
On May 31, 2001, CRL acquired the assets of Avocet Instruments, Inc. for $82,980
plus other costs of $3,350.  The acquisition has been accounted for as an asset
purchase.  The excess of the total acquisition costs over the fair value of the
assets acquired was $16,195.  In conjunction with the Asset Sale Agreement
between the Company and Avocet Instruments, Inc. and Eric B. Lane (Sellers), the
Company and the Sellers entered into a Credit Agreement to establish the terms
and conditions of the purchase price.  The loan is evidenced by an agreement
whereby the Company paid the Sellers $25,000 interest-free, paid $5,000 on the
Closing Date, and $5,000 in each of the following four months.  Thereafter, the
balance ($57,980) is being paid in monthly installments of $1,200, including
interest at the rate of five percent per annum for 54 months.

In the fourth quarter of 2001, the Company converted various trade payables into
notes payable and long-term debt totaling $179,903, of which $90,076 was short-
term debt and 89,827 was long-term debt.  As of December 31, 2002 the balance of
the notes payable and long-term debt has been reduced to $38,150, all of which
is current.

Future  minimum payments as of December 31, 2001 on the long-term debt are as
follows:
              2003            $1,053,254
              2004               441,580
              2005                13,736
              2006                 5,926
              2007                     0
              Thereafter               0
                              ----------
                              $1,514,496
                              ==========

                                       52
<PAGE>
5.    ACQUISITION OF DIALOG4 ASSETS

      On January 18, 2002, the Company acquired the assets of Dialog4 System
Engineering GmbH ("Dialog4").  Dialog4, a German corporation based in
Ludwigsburg, Germany, is a worldwide leader in ISO/MPEG, audio, ISDN, satellite
transmission, networking and storage.  Dialog4 has been designing and
manufacturing equipment for the codec market for over ten years.  Its products,
available in Europe since 1993, include the MusicTaxi codec for encoding and
decoding audio and data over TCP/IP on the Internet, ISDN and satellite.

      The Company purchased the assets of Dialog4 pursuant to an Asset Sale and
Purchase Agreement for $2 million, comprised of 1,250,000 shares of restricted
common stock, valued at $1.00 per share, and $750,000 cash to be paid at a later
date either by the Company from its working capital or by the Company's
President and Chief Executive Officer, Charles Jayson Brentlinger. On April 8,
2002, the Company executed an amendment to the Asset Sale and Purchase Agreement
with Dialog4.  The amended agreement extends the term of the Company's payments
to Dialog4 over twenty months while reducing the amount of the monthly payment
installments to $37,500 plus interest on the remaining principal balance at a
rate of 10 percent per annum.  The monthly installments of principal and
interest are due and payable on the twentieth day of each month commencing April
20, 2002.

      On August 9, 2002, the Company agreed to purchase all existing inventory
of parts related to its Sountainer product from Solectron GmbH for a total price
of $829,328, payable in 24 equal monthly installments including interest.
Solectron had purchased the inventory pursuant to an agreement with Dialog4
approximately two years prior to the purchase of the assets of Dialog4 by the
Company.  The price was equal to the amount paid by Solectron for the inventory
of which the Company expects to release the future sales of that inventory. The
agreement settled a dispute between the Company and Solectron in which Solectron
claimed the Company became liable for the obligation of Dialog4 to purchase the
inventory when the Company acquired the assets of Dialog4.  The Company
maintains it did not undertake the obligation of Dialog4, but to settle the
dispute, agreed to purchase the inventory which it will use in the manufacture
of Sountainer products.  The first monthly payment of $34,555 was made August
14, 2002 with subsequent payments due and payable on the 15th of every month. On
November 11, 2002, the Company and Solectron executed a letter of understanding
in connection with the Settlement Agreement between Solectron and the Company
whereby the Company will defer the October 15, 2002, November 15, 2002 and the
December 15, 2002 payments.  The three deferred payments will be allocated over
the period of one year beginning in January 2003 increasing the installments to
$43,194 per month over the same period of time.  Beginning in January 2004 the
installments will revert to $34,555 per month until the balance is paid in full
July 2004. Mr. Brentlinger will also be required to sign a personal guarantee
under the revised Settlement Agreement. The Company further agreed to indemnify
Mr. Brentlinger should he be required to make any payment under this guarantee.

      We still owe Dialog4 approximately $597,000 payable $37,500 monthly plus
interest, for the purchase of the Dialog4 assets effective January 1, 2002 The
Company has also requested a reduction in the amount payable to Dialog4 each
month (without reducing the total amount due) during the time the Company is
required to pay Dialog4's debt to Solectron GmbH, one of Dialog4's creditors
described above. Dialog4 has requested the monthly payments to be made directly
to creditors of Dialog4, and we are currently negotiating with those creditors
for an acceptable payment schedule. There is no assurance that we can achieve a
satisfactory settlement with those creditors.   Dialog4 has demanded payment of
the August, September and October payments (totaling $119,555.33 including
interest) in full by November 13, 2002 unless we can successfully negotiate a
payment schedule to Dialog4's creditors.  If we are unable to do so, it will
need to satisfy or settle the demands of Dialog4 for payment under the original
asset purchase agreement with Dialog4.

                                       53
<PAGE>
The following table shows the fair values of assets and liabilities recorded for
the acquisition of the assets of Dialog4 System Engineering GmbH:

      Inventories                   $   228,000
      Property and equipment, net        65,000
      Goodwill                        1,742,000

      Share consideration paid       $1,250,000
      Debt issued                       750,000
      Cash consideration paid            35,000
      Debt assumed                            0


6.    STOCKHOLDERS' EQUITY

During the second and third quarters of 2000, the Company sold in a private
placement, for $1.50 per share, 708,158 units of common stock and warrants under
a subscription agreement (the "Subscription Agreement") with accredited
investors.  Under the Subscription Agreement, each unit consists of one share of
the Company's common stock and one warrant (the "Class A Warrants") to purchase
at an exercise price of $1.75 per share one share of the Company's common stock
and one Class B Warrant (as defined).  The Class A Warrant may be exercised for
a sixty-day period following the registration of the shares issuable upon
exercise of the Class A Warrants.  The holder of a Class A Warrant shall not
have the right to obtain a Class B Warrant if the Class A Warrant is not timely
exercised.  Each Class B Warrant, if and when issued, will be a warrant to
purchase at an exercise price of $2.00 per share one share of Company's common
stock and one Class C Warrant.  The holder of a Class B Warrant shall not have
the right to obtain a Class C Warrant if the Class B Warrant is not timely
exercised, as defined in the Subscription Agreement.  Each Class C Warrant, if
and when issued, will be a warrant to purchase at an exercise price of $2.25 per
share one share of Company's common stock and one Class D Warrant.  The holder
of a Class C Warrant shall not have the right to obtain a Class D Warrant if the
Class C Warrant is not timely exercised, as defined in the Subscription
Agreement.  Each Class D Warrant, if and when issued, will be a warrant to
purchase at an exercise price of $2.50 per share one share of Company's common
stock. As of December 31, 2001 and 2000, none of the warrants had been
exercised.

On November 15, 2001, the Company extended the time in which the Class A
Warrants may be exercised by adding 10 days on to the sixty-day period following
the registration of the shares issuable.  Subsequently, on January 23, 2002, the
Company extended the exercise date for the Class A Warrants to February 23, 2002
while lowering the strike price from $1.75 to $1.00. Subsequently, on March 8,
2002 the Company issued 18,000 shares of unrestricted common stock in exchange
for 18,000 Class A Warrant at $.1.00 per share.

On March 22, 2001, the Company issued 26,500 shares of common stock to Charles
Jayson  Brentlinger, its president, for converting part of the existing
stockholder payable at the share price of $1.25 offered to Mr. Brentlinger in
accordance to the June 23, 1999 Stock Purchase Agreement.

                                       54
<PAGE>
On August 10, 2001, the Company issued to Glenn Serafin 92,858 shares of
restricted common stock for converting one of his existing notes to equity at
the market price of $1.05 per share.

On January 18, 2002, the Company issued 1,250,000 shares of restricted common
stock and a note payable in the amount of $750,000 to Dialog4 System Engineering
GmbH pursuant to an asset sale and purchase agreement.

On January 24 the Company issued to Malibu Holdings, LLC.  50,000 shares of
restricted common stock in exchange for consulting services for a period of one
year.

On November 4, 2002  the Company issued 18,750 shares of restricted common stock
to Ellen Brous, 18,750 shares of restricted common stock to Pipia Cophen &
Associates and 12,500 shares of restricted common stock to Debra Fiakas when we
engaged "HD Brous & Co., Inc." to advise and assist us in capital raising
efforts. We cannot offer any assurances that we will be able to attract
additional capital or that additional financing, if obtained, will be sufficient
to meet our current obligations.  If we cannot meet our current obligations, our
ability to continue as a going concern will be jeopardized.

On November 12, 2002 the company issued 5,016 shares of restricted common stock
in connection with his employment contract.

On December 9, 2002 the company issued 5,016 shares of restricted common stock
in connection with his employment contract.

                                       55
<PAGE>

7.    STOCK OPTIONS

In May 1994, the Company's stockholders approved the Company's 1994 Stock Option
Plan, which set aside an aggregate of 120,000 shares of common stock for which
options may be granted to employees, officers, directors, and consultants.
Options are typically exercisable upon the grant date for up to three years at a
price equal to 100% of the fair market value at the date of grant.  There are no
options outstanding under this plan at December 31, 2001 and 2000.

In June 1999, the Company entered into two stock agreements with its President,
Charles Jayson Brentlinger.  The first, pursuant to the terms of a Stock
Purchase Agreement, required the President to purchase 342,500 shares of the
Company's common stock at $1.25 per share within 1 year.  Prior to such date, he
purchased 160,000 shares under the agreement.  On October 20, 2000, the purchase
date was extended to December 31, 2000.  As of December 31, 2000 he remained
obligated to purchase 26,500 shares on or before December 31, 2000 for a total
price of $33,125.  In consideration of the cash advances received from the
President to the Company, the Board of Directors issued a resolution extending
the terms of the stock purchase agreement to February 8, 2001 and subsequently
Mr. Brentlinger fulfilled his remaining obligation.

The second agreement with the president was a grant of stock options, which
vested immediately, to purchase 1,000,000 shares over the next 5 years for $1.25
per share.  No options have been exercised under this grant.  Mr. Brentlinger
has committed to exercise his options, if necessary, in order to satisfy the
Company's debt payments, if operating cash flows are inadequate.

On January 23, 2002, the Company's Board of Directors granted to its Vice
President, Secretary and Director, Gary D. Clarkson, an option which vested
immediately, to purchase 50,000 shares of restricted common stock at a purchase
price of $1.00 per share, exercisable prior to January 23, 2005. No options have
been exercised under this grant.

On January 23, 2002, the Company's Board of Directors granted to its Director,
Carl E. Matthusen, an option which vested immediately, to purchase 50,000 shares
of restricted common stock at a purchase price of $1.00 per share, exercisable
prior to January 23, 2005. No options have been exercised under this grant.

On January 23, 2002, the Company's Board of Directors granted to its Vice
President, Chief Engineer and Director, Robert A. Orban, an option which vested
immediately, to purchase 50,000 shares of restricted common stock at a purchase
price of $1.00 per share, exercisable prior to January 23, 2005. No options have
been exercised under this grant.

On January 23, 2002, the Company's Board of Directors granted to its Director,
Phillip T. Zeni, Sr., an option which vested immediately, to purchase 50,000
shares of restricted common stock at a purchase price of $1.00 per share,
exercisable prior to January 23, 2005. No options have been exercised under this
grant.

                                       56
<PAGE>
8.   INCOME TAXES

The principal reasons for the difference between the income tax benefit
provision and the amounts computed by applying the statutory income tax rates to
the loss for the years ended December 31, are as follows:

                                                        2002            2001
                                                     ---------       ---------
     Federal tax at statutory rates                  ($725,900)      ($695,900)
     State tax at statutory rates                     (128,100)       (122,800)
     Permanent items                                    10,000          16,900
     Other                                                   0         (10,300)
     Increase in valuation allowance                   844,000         812,100
                                                     ---------       ---------
       Total                                                $0              $0
                                                     =========       =========

At December 31, deferred taxes represent the tax effect of temporary differences
related to:
                                                        2002            2001
                                                     ---------       ---------
     Current deferred taxes:
      Inventory capitalization                         $71,800        $113,100
      Inventory obsolescence reserve                   616,600         549,400
      Allowance for doubtful accounts                   43,300          39,500
      Warranty and other reserves                       48,800          81,100
      Accrued expenses                                  87,900          58,900
      Deferred tax valuation allowance                (868,400)       (842,000)
                                                     ---------       ---------
        Total                                               $0              $0
                                                     =========       =========

     Non-current deferred taxes:
      Goodwill amortization                           $113,100        $357,100
      Depreciation and amortization                    (52,300)       (101,300)
      Operating loss carry forward                   2,328,400       1,315,800
      Federal general business credit
        carry forward                                   65,400          65,400
      Deferred tax valuation allowance              (2,454,600)     (1,637,000)
                                                     ---------       ---------
        Total                                               $0              $0
                                                     =========       =========

At December 31, 2002 and 2001, valuation allowances totaling $3,323,000 and
$2,479,000, respectively, were recorded which related to, among other items,
federal and state net operating losses and federal general business credit carry
forwards for which the utilization is not reasonably assured.  Net operating
loss carryforwards of approximately $5,800,000 which expire through 2022, are
available for federal income tax purposes.

                                       57
<PAGE>
9.   SEGMENT REPORTING, SALES TO MAJOR CUSTOMERS AND EXPORT SALES

The Company manufactures and distributes audio processing and Radio and TV
studio equipment.  The Company's primary end user market is radio and TV
stations and also the internet market.  The chief operating decision makers are
provided information about revenue generated by product line, with all products
having similar production processes, customers and distribution channels.  The
Company's long-lived assets are all located in the United States. Accordingly,
the Company operates in one segment.

Sales for the years ended December 31, 2002 and 2001 were conducted primarily
through wholesale distributors and dealers. In 2002, one of our largest
customers, Harris Corporation, accounted for approximately 14% of net sales.  In
2001, the same customer accounted for approximately 19% of net sales.  Broadcast
Supply Worldwide accounted for just over 10% of our net sales for 2002
representing an increase of 2% over 2001.

International sales in 2002 and 2001 totaled $6,200,809 and $6,702,430,
respectively.  Prior to our acquisition of the assets of Dialog4 System
Engineering GmbH on January 18, 2002, we required that all export sales be paid
in U.S. currency. After the acquisition was completed we require that sales out
of our German office be paid in either Euros or USD. All other export sales are
in U.S currency.

     Our export sales by region are as follows:

     Region                     2002       %           2001       %
     --------------------------------------------------------------
     Europe                  $2,158,614   44%        $2,676,880   40%
     Pacific Rim              1,454,145   29          2,217,607   33
     Latin and South America    510,326   10            712,026   11
     Canada and Mexico          650,181   13            908,442   14
     Other                      180,592    4            187,475    3
                             ----------  ----       ----------  ----
     Total                   $4,953,858  100%       $6,702,430  100%
                             ==========  ====       ==========  ====

10.   EMPLOYEE BENEFIT PLAN

The Company maintains a 401(k) profit sharing plan (the "Plan") for the benefit
of all employees who meet certain eligibility requirements.  The Company matches
50% of employee contributions up to a maximum contribution by the Company of 3%
of a participant's annual compensation.  Total annual contributions to a
participant's account may not exceed 25% of compensation.  Company contributions
made to the Plan were $65,653 and $74,261 in 2002 and 2001, respectively.

On August 24, 2001, the Company's Board of Directors approved a monthly employee
stock purchase plan to be effective September 1, 2001.  The plan is offered to
substantially all employees, including officers.  Employees may purchase the
Company's common stock through payroll deductions not exceeding $250 per week.
A non-affiliated dealer on the open market purchases shares at the market price.
During 2002, the plan purchased 11,360 shares of the Company's common stock.

                                       58
<PAGE>
11.   COMMITMENTS AND CONTINGENCIES

Operating Leases - The Company maintains its principal offices and warehouse in
leased facilities in San Leandro, California, under an operating lease which
expires on December 31, 2006.  The lease agreement provides for minimum monthly
rental payments ranging from $27,022 to $30,396.  The Company is also
responsible for the payments of (i) common area operating expenses (as defined),
(ii) utilities, and (iii) taxes. The Company also maintains its principal
corporate offices and facilities in leased facilities in Tempe, Arizona, under
an informal operating lease which expires on December 31, 2005. The Company is
also responsible for the payments (i) taxes and (ii) utilities.

Future minimum lease payments relating to the above operating leases at December
31, 2002 are as follows:

                December 31,       Amount
                ------------       --------
                  2003             $618,264
                  2004              631,224
                  2005              350,724
                  2006              364,752
                                   --------
                                 $1,964,964

Rent expense amounted to $371,219 and $374,489 for the years ended December 31,
2002 and 2001, respectively.


12.   GOING CONCERN

The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As shown in the accompanying
financial statements, the Company incurred losses of $2,135,039 and $2,046,640
during the years ended December 31, 2001 and 2000, respectively. The Company's
deteriorating financial results and reduced liquidity have caused it to
renegotiate its loan agreement with Harman.  Under the terms of the new
agreement, Harman could demand at any time that the Company immediately pay in
full the outstanding balance under the agreement.  Should this happen, the
Company would be forced to immediately file for protection under Chapter 11 of
the United States Bankruptcy Code (Chapter 11).

The Company's deteriorating financial results and lack of liquidity indicate
that the Company may not be able to continue as a going concern for a reasonable
period of time.  The Company's ability to continue as a going concern is
dependent upon several factors, including, but not limited to, (i) the ability
to generate sufficient cash flows to meet its obligations, (ii) obtain
additional or restructure financing, (iii) continue to obtain uninterrupted
supplies from vendors, and (iv) reduce capital expenditures and operating
expenses.

The Company is considering alternatives to raise capital and improve liquidity.
However, there can be no assurance that the Company's efforts to raise adequate
liquidity will be timely or successful.  The accompanying consolidated financial
statements do not include any adjustments relating to the possible future
effects on the recoverability and classification of assets or the amounts and
classification of liabilities that might be necessary should the Company file
for protection under Chapter 11 and/or be unable to continue as a going concern.

                                       59
<PAGE>
ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

      On June 19, 2001, our Board of Directors approved a recommendation from
its Audit Committee that the Company's independent public accounting firm,
Deloitte & Touche LLP, be dismissed and that the independent public accounting
firm of Altschuler, Melvoin and Glasser LLP be engaged, effective as of June 26,
2001, to audit the Company's consolidated financial statements for the year
ending December 31, 2001.

      The Audit Committee was formed in August 1985 and is responsible for
recommending selection of the Company's independent public accountants. The
Audit Committee solicited proposals to render accounting and tax services to the
Company from several independent public accounting firms.

      During the two most recent fiscal years ended December 31,200 and through
June 26, 2001 there were no disagreements between the Company and Deloitte &
Touche on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which, if not resolved to the
satisfaction of Deloitte & Touche, would have caused them to make reference
thereto in connection with their reports.

      The consolidated financial statements of Circuit Research Labs, Inc. and
Subsidiaries as of December 31, 2000 that were audited by Deloitte & Touche LLP
and whose report dated April 16, 2001, (May 17, 2001 as to note 4 and 10, and
October 1, 2001 as to note 11, which expressed an unqualified opinion on those
consolidated financial statements with an emphasis paragraph covering a
restatement and substantial doubt regarding the Company's ability to continue as
a going concern), contained an adverse or qualified opinion or disclaimer of
opinion, audit scope or accounting principles. None of the reportable events
desired under Item 304(a) (1)(iv) of regulation S-B occurred during the
Company's two most recent fiscal years ended December 31, 2000, or thereafter
through June 26, 2001. During such time periods, the Company did not consult
Altschuler, Melvoin & Glasser LLP with respect to any of the matters set forth
in Item 302 (a) (1) of Regulation S-B

                                       60
<PAGE>
                                    PART III

ITEM  9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS  AND  CONTROL PERSONS;
           COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

Our directors, executive officers and key employees, and their ages as of
March 31, 2003 are:

     Name                           Age     Positions
     --------------------------     ---     ------------------------------------
     Charles Jayson Brentlinger     48      Chief Executive Officer, Chairman of
     the Board and President

     Berthold F. Burkhardtsmaier    46      Director

     Gary D. Clarkson               50      Secretary, Vice President and
                                            Director

     Robert A. Orban                57      Vice President, Chief Engineer and
                                            Director

     Carl E. Matthusen              59      Director

     Phillip T. Zeni, Sr.           61      Executive Vice President, Chief
                                            Operating Officer and Director

     Robert W. McMartin             41      Vice President, Treasurer and Chief
                                            Financial Officer

     Greg J. Ogonowski              47      Vice President of New Product
                                            Development

DIRECTORS

     Charles Jayson Brentlinger has served as our President, Chief Executive
Officer and a director since June 1999, and as our Chairman of the Board since
October 1999.  He was formerly the President and owner of Rainbow Broadcasting
Inc. and Brentlinger Broadcasting, Inc. In May 2000, Mr. Brentlinger sold all of
his broadcast ownership interests to his family. Mr. Brentlinger has over 27
years of experience in the radio industry.  He has worked as a broadcast
consultant for nearly every radio station in the Phoenix area. Mr. Brentlinger
formed his own broadcast engineering firm in 1986.  Some of his many clients
have included Scripps Howard Broadcasting, Adams Radio Communications
Corporation, Adams Satellite/ABC, Transtar Radio Network, Pulitzer Broadcasting
Phoenix, Duchossois Communications Corporation, Sundance Communications
Corporation, Arizona Radio and Television Corporation, Cook Inlet Corporation,
First Media Corporation, Duffey II Corporation and TransCOM/Transcolumbia
Corporation.  Mr. Brentlinger attended DeVry Institute of Technology and the
University of Arkansas at Little Rock.  He is a member of the Society of
Broadcast Engineers and National Association of Broadcasters.  He holds a FCC
General Radiotelephone license, valid for life.

     Berthold F. Burkhardtsmaier has served as a Director since January 2002 and
served as our Vice President of European Operations from January 2002 until
February 2003. In 1992, he founded Dialog4 System Engineering GmbH in
Ludwigsburg, Germany and served as its Managing Director for 10 years. During
this time, he introduced the "MusicTAXI" and "Soundtainer" product lines,
established a world-wide product distribution network and received ISO-9001
certification in 1998. From 1989 to 1992, he

                                       61
<PAGE>
was employed by Shure Bros., Inc. to establish their European Subsidiary in
Heilbronn, Germany and serve as its Managing Director. From 1986 to 1989, he was
employed by Harman Deutschland in Germany as a product manager for the JBL and
Shure product lines and was responsible for establishing new market segments in
cinema, professional sound reinforcement and industrial sound. In 1986, Mr.
Burkhardtsmaier received a masters degree in electromechanical engineering from
the Technical University in Munich, Germany where he specialized in acoustics
and communication systems.

     Gary D. Clarkson is one of our founders and has served as our Vice
President since August 2000, our Secretary since October 1999 and as a director
since our incorporation in 1978.  He also served as our Treasurer from August
2000 to June 2001.  Following the death of our other founder, Mr. Ronald R.
Jones, Mr. Clarkson served as our Chief Executive Officer,  President and
Chairman from January 1998 to June 1999.  Mr. Clarkson began his broadcasting
career by serving in assistant and chief engineering positions at several
Phoenix area radio stations from 1971 until 1978.  Since our founding in 1974,
Mr. Clarkson has devoted substantially all of his business efforts to our
business and served as our design engineer from 1974 to 1998. Mr. Clarkson holds
an associate degree in electronics engineering technology from DeVry Institute
of Technology, Phoenix, Arizona.

     Robert A. Orban has served as a Vice President since June 2001 and director
since May 2000.  In 1975, he co-founded Orban Associates, Inc. with his late
business partner, Mr. John Delantoni.  Since that time, Mr. Orban has served as
Chief Engineer for Orban Associates (and its successor, Orban, Inc.) where he
has concentrated on the theoretical support for and subjective tuning of that
company's products.  In 1975, he introduced Orban Associates' standard-setting
OPTIMOD line of audio processors, including the OPTIMOD-FM processors which are
among the most widely used FM processors in the world.  Mr. Orban is the holder
of 25 patents, and he has been widely published in such publications as the
Journal of the Audio Engineering Society and the NAB Engineering Handbook.  In
1993, Mr. Orban shared (with Dolby Labs) a Scientific and Technical Award from
the Academy of Motion Picture Arts and Sciences, and in 1995 he received the
Radio Engineering Achievement Award from the National Association of
Broadcasters.  Mr. Orban received a B.S. in Electrical Engineering from
Princeton University in 1967 and an M.S. in Electrical Engineering from Stanford
University in 1968.

     Carl E. Matthusen has served as a director since February 1988.  Mr.
Matthusen began his career in the broadcast industry in 1963 serving in various
capacities at seven radio broadcast stations in Arizona, Wisconsin, Minnesota
and Virginia.  Since 1978, he has been General Manager of KJZZ-FM, KBAQ-FM and
Sun Sounds Radio Reading Service operated by Rio Salado College in Mesa,
Arizona.  Mr. Matthusen served on the board of directors of National Public
Radio from 1990 to 1996, and was chairman of the board from 1992 to 1996. Since
1999, Mr. Matthusen has served as a member of the board of the International
Association of Audio Information Services.

     Phillip T. Zeni has served as our Executive Vice President and Chief
Operating Officer since October 2002 and as a director since May 2000.  Mr.
Zeni's professional and business career spans more than three decades and
includes ownership and senior management positions in consulting, publishing and
broadcasting.  Since 1993, he has served as President of Transcontinental
Publishing, Inc., a publishing house specializing in international and regional
trade publications for the construction industry. Mr. Zeni is also Executive
Vice President of Palmieri USA, an importer and distributor of construction
equipment, and the owner and Managing Director of PhysicianNet.com, a
six-year-old Web site that serves the medical community. Previously, Mr. Zeni
served as managing partner of a Dallas-based group of broadcasting stations and
as Director of Business Development for NBC Radio and Westinghouse-Group "W"
Broadcasting in Chicago.  He has also served as a Vice President of Multimedia
Communications, and as general manager of two of that company's major
broadcasting properties in the South.  Mr. Zeni has presented seminars for the
National Association of Broadcasters

                                       62
<PAGE>
and the Radio Advertising Bureau.  Mr. Zeni holds a B.A. from the University of
Illinois.  He has served as an adjunct professor at the University of Arkansas
at Little Rock and at Millikin University in Decatur, Illinois.  Mr. Zeni has
also guest lectured at the University of Wisconsin, Michigan State University,
the University of Illinois and Arkansas State University.  Mr. Zeni has been
active in a wide range of charitable, civic and social organizations throughout
his career.  His time in public service included serving on the staff of
Illinois Governor Richard Ogilvie, followed by two White House assignments
during the Ford and Carter administrations.  Currently, Mr. Zeni serves as
President and on the board of directors of the University Club of Phoenix.


EXECUTIVE OFFICERS

     Robert McMartin has served as our Treasurer since January 2002, and as our
Vice President and Chief Financial Officer since June 2001.  Prior to joining
us, Mr. McMartin served as the Chief Financial Officer of IMSure Network, Inc.,
a technology company providing eCommerce Internet technology products, from
March to December 2000.  From November 1999 to March 2000, Mr. McMartin served
as the Director of Finance of Fox Animation Studios, Inc. in Phoenix, Arizona.
Prior to that time, he was Corporate Controller of Trapeze Software Group, Inc.,
a software solutions manufacturer and developer, from April 1998 to November
1999.  Mr. McMartin was employed as a staff accountant for Cotton Parker
Johnson, L.L.P. from June 1998 to October 1998, and held a similar position with
The O'Connor Group, P.C. from November 1997 to May 1998.  From 1992 to 1995, Mr.
McMartin served as Senior Financial Analyst for Blackwell Financial, Inc., a
capital investment firm. Mr. McMartin holds a B.S. in Finance from Westminster
College and a Post Baccalaureate Certificate in Accountancy from Arizona State
University.

     Greg J. Ogonowski has served as our Vice President of New Product
Development since October 2000.  In 1975, Mr. Ogonowski founded Gregg
Laboratories, an audio processing equipment manufacturing company.  From 1998 to
October 2000, Mr. Ogonowski served as Technical Director for KBIG/KLAC in Los
Angeles, California, where he designed and installed a computer network and
digital audio delivery system that resulted in KBIG/KLAC being one of the first
radio stations to directly stream audio to the Internet with internal encoders
and servers.  Mr. Ogonowski has also been directly responsible for other
technical facilities at many major market radio stations, including stations in
Detroit, Dallas and Seattle. As technical director for KTNQ/KLVE, Heftel
Broadcasting, Los Angeles, from 1985 to 1991, Mr. Ogonowski relocated studio
facilities and constructed a new efficient alternative use AM transmission
facility.  In 1984, Mr. Ogonowski founded Modulation Index, a broadcast
engineering consulting company.  He has conducted studies on broadcast
modulation measurement instrumentation and FM modulators, including STLs and
exciters. As a result of these studies, Mr. Ogonowski has developed
modifications for popular monitors, STLs and exciters to improve their dynamic
transient accuracy and competitiveness.  A technical paper was presented before
the National Association of Broadcasters regarding these findings.

                                       63
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance

     Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than 10% of a registered class of the Company's equity
securities, to file with the Securities and Exchange Commission ("SEC") initial
reports of ownership and reports of changes in ownership of common stock and
other equity securities of the Company.  Such reports are filed on Form 3, Form
4, and Form 5 under the Exchange Act.  Directors, executive officers and
greater-than-10% shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.

     Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 3, 4, or 5
were required for those persons, the Company believes that all directors,
executive officers, and greater-than-10% beneficial owners have complied with
all Section 16(a) filing requirements applicable to such persons or entities
during the 2002 fiscal year with the exception of the following: Robert A.
Orban, the Company's Vice President, Chief Engineer and Director, failed to file
his Form 5 until February 27, 2003; on such Form 5, Mr. Orban reported the
acquisition of options to purchase shares of the Company's common stock on
January 23, 2002.



ITEM 10.  EXECUTIVE COMPENSATION.

     The following table sets forth information concerning the annual and
long-term compensation paid or accrued to the Chief Executive Officer and the
four highest compensated executive officers whose salary and bonus exceeded
$100,000 during 2002.

<TABLE>
<CAPTION>
                              Summary Compensation Table

                                                             Securities
Name and Principal          Fiscal                           Underlying      All Other
Position                     Year   Salary        Bonus      Options (#)(1)  Compensation
---------------------------  ----   -----------   ---------  --------------  ------------
<S>                          <C>    <C>           <C>        <C>             <C>
Charles Jayson Brentlinger   2002   $170,594         -            -                -
President, Chief Executive   2001    169,739         -       1,365,005(2)          -
 Officer and Chairman        2000    125,000
 of the Board

Robert A. Orban              2002   $178,566         -          50,000(3)          -
 Vice President and          2001    178,093         -            -                -
 Chief Engineer              2000     93,910(4)

Greg J. Ogonowski            2002   $150,000         -            -                -
 Vice President of New       2001    149,627         -            -                -
 Product Development         2000     17,308(5)      -            -                -

</TABLE>

                                        64
<PAGE>
(1) On July 7, 2000, the Board of Directors declared a one hundred percent stock
dividend effective as of August 15, 2000, payable to record holders of our
common stock as of July 31, 2000.  The number of shares of our common stock
underlying options reflects this stock dividend.

(2) Represents options received by Mr. Brentlinger pursuant to the Stock
Purchase Agreement and options received after giving effect to the anti-dilution
provisions of the Stock Purchase Agreement.  Pursuant to the Stock Purchase
Agreement, Mr. Brentlinger received a five-year option to purchase 1,000,000
shares for $1.25 per share.  This option expires on September 30, 2004.  No
options have been exercised under this grant.For a discussion of the
anti-dilution provisions, see Item 12 Certain Relationships and Related
Transactions - Transactions with Management.

(3) Represents options granted to Mr. Orban by the Board of Directors on January
23, 2002. The options, which vested immediately, are exercisable prior to
January 23, 2005 at a purchase price of $1.00 per share. No options have been
exercised under this grant

(4) Represents Mr. Orban's compensation from May 31, 2000 to December 31, 2000.

(5) Represents Mr. Ogonowski's compensation from November 13, 2000 to December
31, 2000.



COMPENSATION OF DIRECTORS

     We pay our directors (other than directors who are also employees) for
their service.  Each director receives $100 for each board meeting and committee
meeting attended, either in person or by telephone. During the year ended
December 31, 2002, outside directors were paid a total of $1,100 for attendance
at board meetings.


EMPLOYMENT CONTRACTS

     We have an employment agreement with our President, Chief Executive Officer
and Chairman of the Board, Charles Jayson Brentlinger.  This agreement commenced
on January 1, 2002, and continues through May 31, 2005 unless earlier terminated
by the Company for cause.  The agreement will continue in effect after May 31,
2005 unless earlier terminated by either party. Pursuant to the agreement, Mr.
Brentlinger will serve on a full-time basis as our President and Chief Executive
Officer.  The agreement provides that Mr. Brentlinger will receive an annual
base salary of not less than $175,000. The agreement includes provisions
relating to other customary employee benefits and the confidentiality of our
proprietary information.

      We have an employment agreement with our Vice President and Chief
Engineer, Robert A. Orban.  The agreement is dated as of May 31, 2000, and has a
five-year term, unless otherwise earlier terminated by either party. Pursuant to
this agreement, Mr. Orban is employed on a full-time basis as Chief Engineer of
our wholly owned subsidiary, CRL Systems, Inc. doing business as Orban.  The
agreement provides that Mr. Orban will receive an annual base salary of
$178,560, subject to increase annually based upon changes in the consumer price
index.  Mr. Orban may also receive an annual bonus based on the net sales of
Orban products.  The agreement includes provisions relating to other customary

                                        65
<PAGE>
employee benefits, the confidentiality of our proprietary information and Mr.
Orban's assignment to Circuit Research Labs, Inc. of inventions conceived or
developed by Mr. Orban during the term of the agreement.

     We have an employment agreement with Greg J. Ogonowski, our Vice President
of New Product Development.  This agreement commenced on January 1, 2002 and
continues through May 31, 2005 unless earlier terminated by the Company for
cause.  The agreement will continue in effect after May 31, 2005 unless earlier
terminated by either party.  Pursuant to this agreement, Mr. Ogonowski will
serve on a full-time basis as our Vice President of New Product Development. The
agreement provides that Mr. Ogonowski will receive an annual base salary of not
less than $150,000.  The agreement includes provisions relating to other
customary employee benefits and the confidentiality of our proprietary
information.

     We had a Service Contract with Berthold F. Burkhardtsmaier. The contract,
dated November 16, 2001, commenced on January 1, 2002 and was terminated as of
February 14, 2003.  Pursuant to the contract, Mr. Burkhardtsmaier served as our
Vice President of European Operations at an annual base salary of approximately
162,360 Euros, subject to an annual increase of 4%. Additionally, the agreement
provided that the Company furnish a company car to Mr. Burkhardtsmaier and bear
its operating and maintenance costs for business and reasonable private use. The
agreement includes provisions relating to other customary employee benefits and
the confidentiality of our proprietary information.

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The following table presents information concerning the beneficial
ownership of the shares of our common stock as of March 31, 2003, for each of
our directors and named executive officers, all directors and executive officers
as a group and each person known by us to be the beneficial owner of more than
five percent of our common stock.


     Beneficial ownership is determined under the rules of the Securities and
Exchange Commission and generally includes voting or investment power over
securities.  Except in cases where community property laws apply or as indicated
in the footnotes to this table, we believe that each shareholder identified in
the table possesses sole voting and investment power over all shares of common
stock shown as beneficially owned by the shareholder.  Shares of common stock
subject to options and warrants that are exercisable or exercisable within 60
days of March 31, 2003 are considered outstanding and beneficially owned by the
person holding the options or warrants for the purpose of computing the
percentage ownership of that person but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.

                                        66
<PAGE>


                                                       Number of
                                                       Shares         Percent
                                                       Beneficially     of
Name of Beneficial Owner              Title of Class   Owned(1)       Class(2)
---------------------------------     --------------   ---------      ------
Directors and Executive Officers:
 Charles Jayson Brentlinger(3)(4)     Common Stock     2,187,040      42.3%
 Berthold Burkhardtsmaier(5)          Common Stock     1,250,000      32.8%
 Gary D. Clarkson(6)                  Common Stock        51,040       1.3%
 Robert A. Orban(6)                   Common Stock        66,600       1.7%
 Carl E. Matthusen(6)                 Common Stock        50,000       1.3%
 Phillip T. Zeni, Sr.(6)              Common Stock        99,966       2.6%
 Robert McMartin                      Common Stock         2,081         *
 Greg J. Ogonowski                    Common Stock         6,666         *
 All directors and executive
   officers as a group (8 persons)    Common Stock     3,713,393      69.1%

5% Holders:
 Glenn W. Serafin(7)                  Common Stock       207,858       5.5%
 Dialog4 System Engineering GmbH(5)   Common Stock     1,250,000      32.8%
 Cornelia Burkhardtsmaier(5)          Common Stock     1,250,000      32.8%
 Friedrich Maier(5)                   Common Stock     1,250,000      32.8%
 Harman Acquisition Corporation(8)    Common Stock     1,395,690      26.8%


Unless otherwise noted, the address of each person named in the table is 1330
West Auto Drive, Tempe, Arizona 85284.

*   Less than 1%.

(1) On July 7, 2000, our Board of Directors declared a one hundred percent stock
dividend effective as of August 15, 2000, payable to record holders of our
common stock as of July 31, 2000.  The number of shares of our common stock
beneficially owned by each shareholder listed reflects this stock dividend.  The
inclusion herein of any shares of common stock does not constitute an admission
of beneficial ownership of such shares, but are included in accordance with
rules of the Securities and Exchange Commission.

(2) On the basis of 3,806,846 shares of common stock outstanding as of March 31,
2003.

(3) Includes 1,365,005 shares subject to exercisable options granted to Mr.
Brentlinger pursuant to the Stock Purchase Agreement that we entered into with
him on June 23, 1999.  Under the Stock Purchase Agreement, we granted Mr.
Brentlinger a five-year option to purchase 1,000,000 shares of our common stock
at an exercise price of $1.25 per share.  This option was exercisable upon its
grant, and expires on September 30, 2004.  No options have been exercised under
this grant.  On January 16, 2002, Mr. Brentlinger assigned 200,000 of these
options to his father, Mr. Jayson Russell Brentlinger. Mr. Brentlinger has
acquired an additional 565,005 options pursuant to anti-dilution modifications
made to the Stock Purchase Agreement by the Board of Directors on May 15, 2001.
Such anti-dilution modifications are retroactive to June 23, 1999.

(4) Includes 498,682 shares owned by C. Jayson Brentlinger Family Limited
Partnership. Mr. Brentlinger is deemed to have direct beneficial ownership of
the shares owned by C. Jayson Brentlinger Family Limited Partnership based on
his status as General Partner and Trustee of C. Jayson Brentlinger Family
Limited Partnership.  The address of C. Jayson Brentlinger Family Limited
Partnership is 1330 West Auto Drive, Tempe, Arizona 85284.

                                       67
<PAGE>
(5) Based on the information provided in the Schedule 13D/A, Amendment No. 1,
filed jointly by Dialog4 System Engineering GmbH ("Dialog4") and Berthold
Burkhardtsmaier, Cornelia Burkhardtsmaier, and Friedrich Maier (collectively,
the "Shareholders") with the Securities and Exchange Commission on January 6,
2003.  The Shareholders are deemed to have direct beneficial ownership of the
shares owned by Dialog4 based on their status as controlling shareholders of
Dialog4.  The address of Dialog4 and the Shareholders is Dialog4 System
Engineering GmbH, c/o Haver&Mailander, att. Dr. Kessler, Lenzhalde 83-85,
Stuttgart, Germany D-70182.  For a discussion of our acquisition of the assets
of Dialog4 and the shares issued to Dialog4 in connection with the acquisition,
see Item 1 Description of Business - Recent Events.

(6) Includes 50,000 shares subject to immediately exercisable options granted to
this person by the Board of Directors on January 23, 2002.  The options have an
exercise price of $1.00 per share and expire on January 23, 2005.  No options
have been exercised under this grant.

(7) The address of Mr. Serafin is Post Office Box 262888, Tampa, Florida 33685.

(8) Based on the information provided in the Schedule 13D/A, Amendment No. 1,
filed jointly by Harman Acquisition Corporation and Harman International
Industries, Inc. with the Securities and Exchange Commission on March 31, 2003.
The address of Harman Acquisition Corporation is 8500 Balboa Boulevard,
Northridge, California 91329.  The address of Harman International Industries,
Inc. is 1101 Pennsylvania Avenue, Washington, D.C. 20004.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Transactions with Management

     On June 23, 1999, we entered into a Stock Purchase Agreement with Mr.
Brentlinger, our current President, Chief Executive Officer and Chairman of the
Board.  On September 30, 1999, pursuant to the Stock Purchase Agreement, Mr.
Brentlinger purchased 375,000 authorized but previously unissued shares of our
common stock for $1.525 per share, or $571,875. (All amounts of shares and
purchase prices reported in this item have been adjusted to reflect the effects
of a one for one stock dividend paid by us on August 15, 2000 to record holders
of our common stock as of July 31, 2000.)  Pursuant to the Stock Purchase
Agreement, Mr. Brentlinger also purchased all of the shares of common stock
owned by Mr. Clarkson, our current Secretary, consisting of 242,624 shares, also
for $1.525 per share. Mr. Brentlinger agreed to purchase an additional 342,500
shares of our authorized but previously unissued common stock on or before
September 30, 2000, for a purchase price of $1.25 per share.  Following an
extension of the purchase deadline, Mr. Brentlinger fulfilled his obligation to
purchase these shares on February 8, 2001. Pursuant to the Stock Purchase
Agreement, Mr. Brentlinger also received a five-year option to purchase an
additional 1,000,000 shares for $1.25 per share.  This option expires on
September 30, 2004.  On May 15, 2001, the Board of Directors retroactively
amended the Stock Purchase Agreement to include anti-dilution provisions with
respect to this option.  The anti-dilution provisions are triggered in the event
that the Company (1) declares or pays a stock dividend, (2) subdivides its
outstanding shares of common stock, (3) combines its outstanding shares of
common stock, (4) issues any shares of its common stock in a reclassification or
reorganization of the common stock, or (5) issues authorized but previously
unissued shares of its common stock as payment for the stock or assets of
another entity.  Our Board of Directors took this action at the request of Mr.
Brentlinger who wished to preserve his ownership percentage of our common stock
which, absent this action on the part of the Board, would decrease as a result
of our issuance of common stock in connection with our then-likely acquisition
of the assets of Dialog4 System Engineering GmbH, which acquisition was
consummated on January 18, 2002 (see Item 1, Description of Business-Recent
Events).  Mr. Brentlinger participated in the Board's discussions concerning
this matter, but did not take part in the final Board vote to approve the
action.

                                       68
<PAGE>
      Mr. Brentlinger loaned us $195,000 in a short-term non-interest bearing
advance during the second quarter of 2000, to assist us in the purchase of the
assets of Orban, Inc.  On November 30, 2000, Mr. Brentlinger purchased 156,000
shares of our common stock for $1.25 per share in partial fulfillment of his
contractual obligation to purchase 342,500 shares of our common stock pursuant
to the Stock Purchase Agreement.  Mr. Brentlinger paid for these 156,000 shares
by cancellation of the debt we owed to him for the $195,000 advance. On February
8, 2001, Mr. Brentlinger purchased 26,500 shares of our common stock for $1.25
per share thus fulfilling his contractual obligation to purchase 342,500 shares
of our common stock pursuant to the Stock Purchase Agreement.

      We had a one-year employment and consulting agreement with James Seemiller
and ATB Broadcasting Corporation, a labor management consulting company of which
Mr. Seemiller is the owner and President.  The agreement, which was dated as of
March 9, 2001, was terminated effective as of January 31, 2002. Pursuant to the
agreement, Mr. Seemiller served as our Chief Financial Officer and Vice
President of Sales, Marketing and New Business Development at an annual base
salary of approximately $111,000. Additionally, the agreement provided for the
payment of annual consulting fees of approximately $24,000 to ATB Broadcasting.

ACQUISITION OF ORBAN, INC.

      On May 31, 2000, we acquired the assets of Orban, Inc., a wholly owned
subsidiary of Harman International Industries, Inc., including the rights to the
name "Orban."  Including the $500,000 previously paid to Harman as
non-refundable deposits in 1999, the total stated purchase price was $10.5
million, of which $2 million was paid in cash and the balance of which was paid
by means of a combination of short-term and long-term promissory notes that we
issued to the seller.  In order to raise the $2 million cash necessary for the
purchase, we sold approximately $1,171,000 in common stock and warrants through
a private placement, and we mortgaged our Tempe, Arizona office building for
$335,000.  We also received a $150,000 advance from our majority shareholder,
Mr. Brentlinger.  We obtained the remainder of the purchase price from cash on
hand.  The seller financing consisted of a $3.5 million short-term note and a $5
million long-term note payable to Harman.

     We received several extensions on the long-term and short-term notes.
First, in exchange for $150,000 cash and an increase in the interest rates to 12
percent per annum for both notes, Harman extended the maturity date of the
short-term note to November 30, 2000. The maturity date of the short-term note
was subsequently extended several times without fees or other significant
changes to the original terms of the note and is due April 30, 2002.
Additionally, the first principal payment on the long-term note of $250,000,
originally due March 31, 2001, was extended to September 30, 2001, with the
remaining quarterly principal payments deferred until April 30, 2002.

     On October 1, 2001, we entered into an Amendment to Credit Agreement with
Harman under which both the long-term and the short-term notes were amended and
restated.  Under the Amended Credit Agreement, both promissory notes were
converted to demand notes payable on the demand of Harman or, if no demand is
sooner made, on the dates and in the amounts specified in the Amended Credit
Agreement.  Interest only payments remain payable from time to time for both
notes and are also due on demand.  Additionally, under the Amended Credit
Agreement, the first principal payment on the long-term note of $250,000, the
due date of which had been extended to September 30, 2001, was increased to
$1,250,000 and is now due April 30, 2002, unless Harman demands payment at an
earlier date.  Interest has been paid according to the scheduled due dates.

                                       69
<PAGE>
     In addition to the stated purchase price, we issued to Harman warrants to
purchase 1,000,000 shares of our common stock, exercisable for $2.25 per share.
The warrants have a three-year term and can be exercised either (i) by payment
in cash, (ii) by reducing the amount of the unpaid principal on the long-term or
short-term note, or (iii) by any combination of (i) and (ii).  We obtained an
independent valuation of the warrants in November 2000 from Houlihan Valuation
Advisors which valued the warrants at $1,050,000 as of May 31, 2000. When
combined with the cash purchase price, this results in a total purchase price of
Orban's assets of $11,550,000. As part of the acquisition, we also purchased the
rights to the name "Orban" and our Orban division is currently operating under
that name.

      In March 2003, we and Harman entered into a letter of intent to further
amend our agreement with Harman. The letter agreement and conditions to the
amendment are discussed under Item 1 of this report.

OTHER

     We issued $205,000 in long-term debt to one of our shareholders, Mr. Glenn
Serafin, in consideration for his role in the acquisition of the net assets of
Orban.  The promissory note that evidences our debt to Mr. Serafin bears
interest at 7.5 percent per annum, with principal and interest due monthly
beginning August 1, 2000 and continuing for four years.  We also incurred fees
of $97,500 to Mr. Serafin for arranging the purchase financing of Orban, the
total of which was due on May 14, 2001, but has since been extended to August
14, 2001.  On August 10, 2001, the note was converted to equity at the market
price of $1.05 per share.

     On January 18, 2002, we acquired the assets of Dialog4 System Engineering
GmbH, a worldwide leader in ISO/MPEG, audio, ISDN, satellite transmission,
networking and storage. As part of the acquisition the company entered into an
employment agreement with Berthold Burkhardtsmaier where he will serve on a
full-time basis as Vice President of European Operations and as a member of the
Company's board of Directors. Subsequently, the Company amended the Asset Sale
and Purchase Agreement where Mr. Burkhardtsmaier acts in the capacity of both
the Managing Director of Dialog4 System Engineering GmbH and as Vice President
of European Operations for Orban Europe. The agreement extended the terms of
payment from 10 months to 20 months reducing the monthly installments to $37,500
while adding interest on the remaining unpaid principal at a rate of 10 percent
per annum with monthly principal and interest payments due on the 20th day of
each month starting April 20, 2002.

                                       70
<PAGE>
                                     PART IV

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

      The following is a list of the consolidated financial statements of
Circuit Research Labs, Inc. included at Item 7 of Part II of this Form 10-KSB.

      Financial Statements:
      ---------------------                                      Page
                                                                -----
Independent Auditors' Report                                      35
Consolidated Financial Statements:
  Consolidated Balance Sheets - December 31, 2002 and 2001        36
  Consolidated Statements of Operations -
    For the Years Ended December 31, 2002 and 2001                38
  Consolidated Statements of Stockholders' Equity -
    For the Years Ended December 31, 2002 and 2001                39
  Consolidated Statements of Cash Flows -
    For the Years Ended December 31, 2002 and 2001                40
  Notes to Financial Statements - December 31, 2002 and 2001      42


     (a)  Exhibits.

Exhibit
Number    Description

2.1(1)    Asset Sale and Purchase Agreement, dated as of November 16, 2001,
          among  Dialog4  System  Engineering  GmbH, Berthold Burkhardtsmaier,
          Cornelia Burkhardtsmaier, Friedrich Maier, Circuit Research Labs, Inc.
          and CRL Systems, Inc.
3.1(2)    Restated Articles of Incorporation of the Company
3.1a(2)   Articles of Amendment to the Company's Restated Articles of
          Incorporation
3.1b(2)   Articles of Amendment to the Company's Restated Articles of
          Incorporation
3.2(3)    Bylaws of the Company
4.1(4)    Warrant to Harman Acquisition Corp. (formerly known as Orban, Inc.),
          dated as of May 31, 2000
4.2(5)    Form of Class A Stock Purchase Warrant dated as of May 30, 2000
4.3(10)   Form of Class B Stock Purchase Warrant dated as of February 25, 2002
10.1(6)   Circuit Research Labs, Inc. 1994 Stock Option Plan
10.2(4)   Asset Sale Agreement, dated as of May 31, 2000, by and between
          CRL Systems, Inc. and Orban, Inc.
10.3(4)   Guarantee and Collateral Agreement, dated as of May 31, 2000, by and
          between Circuit Research Labs, Inc., as Parent, CRL Systems, Inc., as
          Borrower, and Orban, Inc., as Lender
10.4(4)   Credit Agreement, dated as of May  31, 2000, by and between
          CRL Systems, Inc., as Borrower, and Orban, Inc., as Lender
10.4.1(4) First Extension Agreement, dated as of September 29, 2000, by and
          between CRL Systems, Inc. and Harman Acquisition Corporation, formerly
          known as Orban, Inc., extending the maturity date of the Tranche B
          Note to November 30, 2000

                                       71
<PAGE>
Exhibit
Number    Description

10.4.2(2) Second  Extension Agreement, dated as of  November  28, 2000, by and
          between CRL Systems, Inc. and Harman Acquisition Corporation, formerly
          known as Orban, Inc., extending the maturity date of the Tranche B
          Note to January 20, 2001
10.4.3(2) Third Extension Agreement, dated as of January 18, 2001, by and
          between CRL Systems, Inc. and Harman Acquisition Corporation, formerly
          known as Orban, Inc., extending the maturity date of the Tranche B
          Note to February 20, 2001
10.4.4(2) Fourth Extension Agreement, dated as of February 22, 2001, by and
          between CRL Systems, Inc. and Harman Acquisition Corporation, formerly
          known as Orban, Inc., extending the maturity date of the Tranche B
          Note to May 14, 2001
10.4.5(2) Tranche A Note Extension Agreement, dated as of March 30, 2001, by and
          between CRL Systems, Inc. and Harman Acquisition Corporation, formerly
          known as Orban, Inc.
10.4.6(2) Tranche A Note and Tranche B Note Extension Agreement, dated as of
          April 16, 2001, by and between CRL Systems, Inc. and Harman
          Acquisition Corporation, formerly known as Orban, Inc.
10.5(4)   Tranche A Note, dated as of May 31, 2000, from CRL Systems, Inc. to
          Orban, Inc. in the amount of $5,000,000
10.6(4)   Tranche B Note, dated as of May 31, 2000, from CRL Systems, Inc. to
          Orban, Inc. in the amount of $3,500,000
10.7(7)   Amendment to Credit Agreement, dated as of October 1, 2001, by and
          between CRL Systems, Inc. as Borrower, and Harman Acquisition
          Corporation (formerly known as Orban, Inc.), as Lender
10.8(7)   Amended and Restated Tranche A Note, dated as of October 1, 2001, from
          CRL Systems, Inc. to Harman Acquisition Corporation (formerly known as
          Orban, Inc.) in the amount of $5,000,000
10.9(7)   Amended and Restated Tranche B Note, dated as of October 1, 2001, from
          CRL Systems, Inc. to Harman Acquisition Corporation (formerly known as
          Orban, Inc.) in the amount of $3,500,000
10.10(1)  Amendment to Existing Agreements and Closing Declaration, dated as of
          January 18, 2002, among Dialog4 System Engineering GmbH, Berthold
          Burkhardtsmaier, Cornelia  Burkhardtsmaier, Friedrich Maier,  Circuit
          Research Labs, Inc., CRL Systems, Inc. and Charles Jayson Brentlinger
10.11(10) Second Amendment to Existing Agreements and Closing Declaration, dated
          as of March 26, 2002, among Dialog4 System Engineering GmbH, Berthold
          Burkhardtsmaier, Cornelia Burkhardtsmaier, Friedrich Maier, Circuit
          Research Labs, Inc., CRL Systems, Inc. and Charles Jayson Brentlinger

10.12(10) Employment Agreement, dated as of January 1, 2002, by and between
          Charles Jayson Brentlinger and Circuit Research Labs, Inc.
10.13(1)  Service Contract, dated November 16, 2001, by and between Circuit
          Research Labs, Inc. and Berthold Burkhardtsmaier
10.14(10) Employment Agreement, dated as of January 1, 2002, by and between Gary
          D. Clarkson and Circuit Research Labs, Inc.
10.15(10) Employment Agreement, dated as of January 1, 2002, by and between
          William R. Devitt and Circuit Research Labs, Inc.
10.16(10) Employment Agreement, dated as of January 1, 2002, by and between
          Robert W. McMartin and Circuit Research Labs, Inc.
10.17(10) Employment Agreement, dated as of January 1, 2002, by and between Greg
          J. Ogonowski and Circuit Research Labs, Inc.

                                       72
<PAGE>
Exhibit
Number    Description

10.18(5)  Employment Agreement dated as of May 31, 2000 by and between Robert A.
          Orban and Circuit Research Labs, Inc.
10.19(5)  Employment and Consulting Agreement, dated as of March 9, 2001, by and
          between James Seemiller, ATB Broadcasting Corporation and Circuit
          Research Labs, Inc.
10.20(8)  Stock Purchase Agreement, dated as of June 23, 1999, by and between
          Charles Jayson Brentlinger, Circuit Research Labs, Inc., and
          Gary D. Clarkson
10.21*    Employment Agreement dated as of October 1, 2002 by and between
          Phillip T. Zeni and Circuit Research Labs, Inc.
10.22*    Amended and Restated Employment Agreement dated as of October 1, 2002
          by and between Phillip T. Zeni and Circuit Research Labs, Inc.
21.1*     Subsidiaries of Circuit Research Labs, Inc.
23.1*     Consent of Altschuler, Melvoin and Glasser LLP (included on page 31 of
          this Report on Form 10-KSB)
23.2*     Consent of Deloitte & Touche LLP (included on page 32 of this Report
          on Form 10-KSB)
24.1*     Power of Attorney (included on signature pages of this Report on Form
          10-KSB)
99.1*     Section 906 Certification of Chief Executive Officer of the Company
99.2*     Section 906 Certification of Chief Financial Officer of the Company
99.3(11)  Letter Agreement between Circuit Research Labs, Inc. and Harman
          Acquisition Corp. dated as of March 27, 2003

 *  Filed herewith.

(1)  Incorporated by reference to the Registrant's Report on Form 8-K dated
     February 4, 2002.

(2)  Incorporated by reference to the Registrant's Registration Statement on
     Form SB-2 (File No. 333-69712) effective November 13, 2001.

(3)  Incorporated by reference to the Registrant's Registration Statement on
     Form S-18 (File No. 2-85779-LA) effective October 14, 1983.

(4)  Incorporated by reference to the Registrant's Report on Form 8-K/A dated
     October 12, 2000.

(5)  Incorporated by reference to the Registrant's Report on Form 10-KSB for the
     fiscal year ended December 31, 2000.

(6)  Incorporated by reference to the Registrant's Registration Statement on
     Form S-8 (File No. 33-82176).

(7)  Incorporated by reference to the Registrant's Report on Form 8-K dated
     October 26, 2001.

(8)  Incorporated by reference to Exhibit A of Schedule 13D filed with the
     Commission by Charles Jayson Brentlinger on July 7, 1999
     (File No. 005-56483).

(9)  Incorporated by reference to the Registrant's Report on Form 8-K dated
     June 26, 2001.

(10) Previously filed with the Registrant's Form 10-KSB for the fiscal year
     ended December 31, 2001.

(11) Incorporated by reference to the Registrant's Report on Form 8-K dated
     April 1, 2003.


     (b)   During the three months ended December 31, 2002, the Registrant
filed the following reports on Form 8-K:

           Form 8-K (Item 9) filed on October 1, 2002 announced the Registrant
has submitted the CEO and CFO certifications with respect to the Company's
quarterly report, amendment no. 1, on Form 10-QSB/A for the quarter ended June
30, 2002 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

                                       73
<PAGE>
           Form 8-K (Item 7 and 9) filed on November 19, 2002 announced the
Registrant has submitted the CEO and CFO certifications with respect to the
Company's quarterly report on Form 10-QSB for the quarter ended September 30,
2002 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

           Form 8-K (Item 9) filed on November 27, 2002 announced the Registrant
mailed a letter to its shareholders announcing recent developments concerning
the Registrant.

           Form 8-K (Item 5) filed on December 18, 2002 reporting that on
December 16, 2002, Dialog4 System Engineering GmbH declared the Registrant in
default of its obligation to complete payment for assets of Dialog4 under an
Asset Sale and Purchase Agreement dated January 18, 2002.


ITEM 14.  CONTROLS AND PROCEDURES.

Within 90 days prior to the filing date of this 2002 Form 10-KSB, we carried out
an evaluation, under the supervision and with the participation of our principal
executive officer and principal financial officer, of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on this
evaluation, our principal executive officer and principal financial officer
concluded that our disclosure controls and procedures are effective in alerting
them in a timely manner to material information required to be disclosed in our
periodic reports filed with the SEC. It should be noted that the design of any
system of controls is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions,
regardless of how remote.

In addition, we reviewed our internal controls, and there have been no
significant changes in our internal controls or in other factors that could
significantly affect those controls subsequent to the date of their most recent
evaluation.

                                       74
<PAGE>


                           SIGNATURES

      Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report on Form 10-KSB to
be signed on its behalf by the undersigned, thereunto duly authorized, this 15th
day of April, 2003.

                                   CIRCUIT RESEARCH LABS, INC.

                                   By: /s/ C. Jayson Brentlinger
                                   -----------------------------------
                                   C. Jayson Brentlinger
                                   Chief Executive Officer, President and
                                   Chairman of the Board

                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints C. Jayson Brentlinger and Robert W.
McMartin, and any of them (with full power to each of them to act alone), as his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Form 10-KSB Annual Report,
and to file the same, with all exhibits thereto, and other documents in
connection therewith with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and to perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully and to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents and/or any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
on Form 10-KSB has been signed below by the following persons on behalf of the
Company and in the capacities and on the date indicated.

Signature                        Title                         Date

/s/ C. Jayson Brentlinger        President, Chairman of the    April 15, 2003
------------------------------   Board and Chief Executive
C. Jayson Brentlinger            Officer


/s/ Gary D. Clarkson             Vice President, Secretary     April 15, 2003
------------------------------   and Director
Gary D. Clarkson


/s/ Robert A. Orban              Vice President, Chief         April 15, 2003
------------------------------   Engineer and Director
Robert A. Orban


/s/ Phillip T. Zeni, Sr.         Executive Vice President,     April 15, 2003
------------------------------   Chief Operating Officer
Phillip T. Zeni, Sr.             and Director


/s/ Carl E. Matthusen            Director                      April 15, 2003
------------------------------
Carl E. Matthusen


                                 Director                      April 15, 2003
------------------------------
Berthold F. Burkhardtsmaier


/s/ Robert W. McMartin           Vice President, Treasurer     April 15, 2003
------------------------------   and Chief Financial Officer
Robert W. McMartin               (principal accounting officer)

                                       75
<PAGE>
                                 CERTIFICATIONS

I, C. Jayson Brentlinger, certify that:

1. I have reviewed this annual report on Form 10-KSB of Circuit Research Labs,
Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d- 14) for the registrant and have:

     a) designed such disclosure controls and procedures to ensure that material
     information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this annual report is being
     prepared;

     b) evaluated the effectiveness of the registrant's disclosure controls and
     procedures as of a date within 90 days prior to the filing date of this
     annual report (the "Evaluation Date"); and

     c) presented in this annual report our conclusions about the effectiveness
     of the disclosure controls and procedures based on our evaluation as of the
     Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

     a) all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal
     controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: April 15, 2003

/s/ C. Jayson Brentlinger
-------------------------
Chief Executive Officer, President and
Chairman of the Board

                                       76
<PAGE>
I, Robert W. McMartin, certify that:

1. I have reviewed this annual report on Form 10-KSB of Circuit Research Labs,
Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d- 14) for the registrant and have:

     a) designed such disclosure controls and procedures to ensure that material
     information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this annual report is being
     prepared;

     b) evaluated the effectiveness of the registrant's disclosure controls and
     procedures as of a date within 90 days prior to the filing date of this
     annual report (the "Evaluation Date"); and

     c) presented in this annual report our conclusions about the effectiveness
     of the disclosure controls and procedures based on our evaluation as of the
     Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

     a) all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal
     controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: April 15, 2003

/s/ Robert W. McMartin
----------------------
Vice President, Treasurer and
Chief Financial Officer

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                          Exhibit Index
Exhibit
Number    Description

2.1(1)    Asset Sale and Purchase Agreement, dated as of November 16, 2001,
          among  Dialog4  System  Engineering  GmbH, Berthold Burkhardtsmaier,
          Cornelia Burkhardtsmaier, Friedrich Maier, Circuit Research Labs, Inc.
          and CRL Systems, Inc.
3.1(2)    Restated Articles of Incorporation of the Company
3.1a(2)   Articles of Amendment to the Company's Restated Articles of
          Incorporation
3.1b(2)   Articles of Amendment to the Company's Restated Articles of
          Incorporation
3.2(3)    Bylaws of the Company
4.1(4)    Warrant to Harman Acquisition Corp. (formerly known as Orban, Inc.),
          dated as of May 31, 2000
4.2(5)    Form of Class A Stock Purchase Warrant dated as of May 30, 2000
4.3(10)   Form of Class B Stock Purchase Warrant dated as of February 25, 2002
10.1(6)   Circuit Research Labs, Inc. 1994 Stock Option Plan
10.2(4)   Asset Sale Agreement, dated as of May 31, 2000, by and between
          CRL Systems, Inc. and Orban, Inc.
10.3(4)   Guarantee and Collateral Agreement, dated as of May 31, 2000, by and
          between Circuit Research Labs, Inc., as Parent, CRL Systems, Inc., as
          Borrower, and Orban, Inc., as Lender
10.4(4)   Credit Agreement, dated as of May  31, 2000, by and between
          CRL Systems, Inc., as Borrower, and Orban, Inc., as Lender
10.4.1(4) First Extension Agreement, dated as of September 29, 2000, by and
          between CRL Systems, Inc. and Harman Acquisition Corporation, formerly
          known as Orban, Inc., extending the maturity date of the Tranche B
          Note to November 30, 2000
10.4.2(2) Second  Extension Agreement, dated as of  November  28, 2000, by and
          between CRL Systems, Inc. and Harman Acquisition Corporation, formerly
          known as Orban, Inc., extending the maturity date of the Tranche B
          Note to January 20, 2001
10.4.3(2) Third Extension Agreement, dated as of January 18, 2001, by and
          between CRL Systems, Inc. and Harman Acquisition Corporation, formerly
          known as Orban, Inc., extending the maturity date of the Tranche B
          Note to February 20, 2001
10.4.4(2) Fourth Extension Agreement, dated as of February 22, 2001, by and
          between CRL Systems, Inc. and Harman Acquisition Corporation, formerly
          known as Orban, Inc., extending the maturity date of the Tranche B
          Note to May 14, 2001
10.4.5(2) Tranche A Note Extension Agreement, dated as of March 30, 2001, by and
          between CRL Systems, Inc. and Harman Acquisition Corporation, formerly
          known as Orban, Inc.
10.4.6(2) Tranche A Note and Tranche B Note Extension Agreement, dated as of
          April 16, 2001, by and between CRL Systems, Inc. and Harman
          Acquisition Corporation, formerly known as Orban, Inc.
10.5(4)   Tranche A Note, dated as of May 31, 2000, from CRL Systems, Inc. to
          Orban, Inc. in the amount of $5,000,000
10.6(4)   Tranche B Note, dated as of May 31, 2000, from CRL Systems, Inc. to
          Orban, Inc. in the amount of $3,500,000
10.7(7)   Amendment to Credit Agreement, dated as of October 1, 2001, by and
          between CRL Systems, Inc. as Borrower, and Harman Acquisition
          Corporation (formerly known as Orban, Inc.), as Lender
10.8(7)   Amended and Restated Tranche A Note, dated as of October 1, 2001, from
          CRL Systems, Inc. to Harman Acquisition Corporation (formerly known as
          Orban, Inc.) in the amount of $5,000,000

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10.9(7)   Amended and Restated Tranche B Note, dated as of October 1, 2001, from
          CRL Systems, Inc. to Harman Acquisition Corporation (formerly known as
          Orban, Inc.) in the amount of $3,500,000
10.10(1)  Amendment to Existing Agreements and Closing Declaration, dated as of
          January 18, 2002, among Dialog4 System Engineering GmbH, Berthold
          Burkhardtsmaier, Cornelia  Burkhardtsmaier, Friedrich Maier,  Circuit
          Research Labs, Inc., CRL Systems, Inc. and Charles Jayson Brentlinger
10.11(10) Second Amendment to Existing Agreements and Closing Declaration, dated
          as of March 26, 2002, among Dialog4 System Engineering GmbH, Berthold
          Burkhardtsmaier, Cornelia Burkhardtsmaier, Friedrich Maier, Circuit
          Research Labs, Inc., CRL Systems, Inc. and Charles Jayson Brentlinger
10.12(10) Employment Agreement, dated as of January 1, 2002, by and between
          Charles Jayson Brentlinger and Circuit Research Labs, Inc.
10.13(1)  Service Contract, dated November 16, 2001, by and between Circuit
          Research Labs, Inc. and Berthold Burkhardtsmaier
10.14(10) Employment Agreement, dated as of January 1, 2002, by and between Gary
          D. Clarkson and Circuit Research Labs, Inc.
10.15(10) Employment Agreement, dated as of January 1, 2002, by and between
          William R. Devitt and Circuit Research Labs, Inc.
10.16(10) Employment Agreement, dated as of January 1, 2002, by and between
          Robert W. McMartin and Circuit Research Labs, Inc.
10.17(10) Employment Agreement, dated as of January 1, 2002, by and between Greg
          J. Ogonowski and Circuit Research Labs, Inc.
10.18(5)  Employment Agreement dated as of May 31, 2000 by and between Robert A.
          Orban and Circuit Research Labs, Inc.
10.19(5)  Employment and Consulting Agreement, dated as of March 9, 2001, by and
          between James Seemiller, ATB Broadcasting Corporation and Circuit
          Research Labs, Inc.
10.20(8)  Stock Purchase Agreement, dated as of June 23, 1999, by and between
          Charles Jayson Brentlinger, Circuit Research Labs, Inc., and
          Gary D. Clarkson
10.21*    Employment Agreement dated as of October 1, 2002 by and between
          Phillip T. Zeni and Circuit Research Labs, Inc.
10.22*    Amended and Restated Employment Agreement dated as of October 1, 2002
          by and between Phillip T. Zeni and Circuit Research Labs, Inc.
21.1*     Subsidiaries of Circuit Research Labs, Inc.
23.1*     Consent of Altschuler, Melvoin and Glasser LLP (included on page 31 of
          this Report on Form 10-KSB)
23.2*     Consent of Deloitte & Touche LLP (included on page 32 of this Report
          on Form 10-KSB)
24.1*     Power of Attorney (included on signature pages of this Report on Form
          10-KSB)
99.1*     Section 906 Certification of Chief Executive Officer of the Company
99.2*     Section 906 Certification of Chief Financial Officer of the Company
99.3(11)  Letter Agreement between Circuit Research Labs, Inc. and Harman
          Acquisition Corp. dated as of March 27, 2003

 *  Filed herewith.

(1)  Incorporated by reference to the Registrant's Report on Form 8-K dated
     February 4, 2002.

(2)  Incorporated by reference to the Registrant's Registration Statement on
     Form SB-2 (File No. 333-69712) effective November 13, 2001.

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(3)  Incorporated by reference to the Registrant's Registration Statement on
     Form S-18 (File No. 2-85779-LA) effective October 14, 1983.

(4)  Incorporated by reference to the Registrant's Report on Form 8-K/A dated
     October 12, 2000.

(5)  Incorporated by reference to the Registrant's Report on Form 10-KSB for the
     fiscal year ended December 31, 2000.

(6)  Incorporated by reference to the Registrant's Registration Statement on
     Form S-8 (File No. 33-82176).

(7)  Incorporated by reference to the Registrant's Report on Form 8-K dated
     October 26, 2001.

(8)  Incorporated by reference to Exhibit A of Schedule 13D filed with the
     Commission by Charles Jayson Brentlinger on July 7, 1999
     (File No. 005-56483).

(9)  Incorporated by reference to the Registrant's Report on Form 8-K dated
     June 26, 2001.

(10) Previously filed with the Registrant's Form 10-KSB for the fiscal year
     ended December 31, 2001.

(11) Incorporated by reference to the Registrant's Report on Form 8-K dated
     April 1, 2003.

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